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PHILADELPHIA: 
JOHN CAMPBELL & SON, 

740 SANSOM ST. 




1874 • i-. 



HI ^ 4.1 

•SB 



Entered, according to Act of Congress, in the year 1874, by 
J. W. SCHUCKEES, 

In the Office of the Librarian of Congress at Washington. 



MEAR8 AS?B DUSENBERY, 
STEREOTTPERS. 



THE WRITER'S PREFACE, 



I DO not pretend, in this little volume, to any new discoveries 
touching the financial history of the Revolutionary War, but 
only to having brought together, in one place, those facts which 
are of prime interest and importance. They are written down 
with almost statistical brevity, but he who thoughtfully reads 
them will see how painfully our forefathers struggled and suf- 
fered to bring us " out of the land of Egypt, out of the house 
of bondage." 

Ours is the only great nation which, in the Nineteenth Cen- 
tury, has paid a public debt contracted for war purposes, and 
it is not the least of the proud achievements of the American 
people. I have brought my little book to an abrupt close, 
because I wished to say here what might perhaps have been 
more appropriately said in a closing paragraph. It is this: 
That the most glorious celebration we could have have made 
of our Centennial Anniversary, would have been the simple 
announcement that, for a second time, in the first century of 

(iii) 



iv Preface, 

our national existence, we had paid off a public debt. To do 
this would have required great exertions and great sacrifices, 
but such exertions and sacrifices were not beyond the powers of 
the American people. 

I will be allowed to add that the surest and safest way to a 
resumption of specie payments is through the extinction of 
the public debt. Its payment ought to be the paramount object 
of every administration, and is a policy commended alike by 
National Duty and National Honour. 

J. W. SCHUCKERS. 



New York, October 1st, 1874. 



THE REVOLUTIONARY riNANCES. 



Paper Money — technically called Bills of Credit — 
were issued by the colony of Massachusetts Bay cer- 
tainly as early as 1690; and probably some years 
previously bills were emitted by private persons upon 
the security of private properties. There is evidence 
that in 1686 a bank was formed in that colony by a 
gentleman of Boston, with several others, some from 
England, who were authorized to begin the issuing of 
bills on the security of real and personal estates ; but 
we have so little record of its history that no detailed 
or definite account of it can be offered. We learn 
from the Massachusetts Archives that authority was 
given to seven persons to start a bank and issue bills, 
in these words: ^^And having perused and considered 
a proposall made to us by John Blackwell, of Boston, 
Esqr., on behalf of himself and divers others, his parti- 
cipants, as well in England as in this countrey," liberty 
is granted to the directors or " conservatives" of the 
bank to commence the issuing of bills on real and per- 
sonal security, and on merchandise. The writer of a 
pamphlet, entitled " A Letter from one in Boston to 
his Friend in the Country, in Answer to a Letter 

5 



6 The Revolutionary Finances, 

directed to John Burrill, Esqre., 1714," says: "Our 
fathers about twenty-eight years ago entered into a 
partnership to circulate their notes, founded on land 
security, stamped on paper as our Province bills now 
are."^ 

p2. Bills of credit were issued by the several colo- 
nies prior to the revolutionary war, and for their pay- 
ment the public faith was pledged. They were called 
in by taxes payable at different periods, and were not 
only made receivable in payment of taxes, and of all 
debts due to the government making them, but were 
made a tender also in payment of private debts, until 
this was prohibited by Act of Parliament in 1763. 
Massachusetts led the way in making and issuing this 
species of money. That colony incurred expenses in 
an unfortunate maritime expedition against Quebec in 
1690, much beyond its ordinary means of payment, 
and to meet these expenses resorted to the expedient 
of issuing bills of credit of the colony. This was after- 
wards followed, as cases of emergency arose, by most 
if not all the other British North American colonies. 
They became less valuable, however, in every colony in 
which they were issued, than gold and silver. In New 
England they were valued at six shillings for a silver 
dollar, and at that rate were denominated the lawful 
money of that part of the country; in New York 
they were valued at eight shillings, and in Pennsyl- 
vania at seven shillings and sixpence for a dollar ; and 
hence arose the different currencies in the several 
colonies. Excessive emissions caused depreciations. In 

* Nathaniel Paine : '* Essay on Early Continental Currency." 



The Revolutionary Finances, 7 

1745 Massachusetts alone — to pay the expenses of her 
fortunate expedition against Louisbourg, and in other 
preparations in the war then existing between France 
and England — emitted bills to the amount of between 
two and three million pounds lawful money. This 
large increase in the amount of bills in circulation 
naturally occasioned a greater depreciation, so that in 
1748 eleven hundred pounds of these bills were only 
equal to one hundred pounds sterling.^ 

3. ^Governor Pownall gives this account of the 
Pennsylvania system : " I will venture to say there 
never was a wiser or a better measure, never one 
better calculated to serve tlie uses of an increasing 
country, that there never was a measure more steadily 
or more faithfully pursued, for forty years together, 
than the loan office in Pennsylvania, formed and 
administered by the Assembly of that province." He 
gives a sketch of the loan office act passed in the year 
1739^' which he styles ^Uhe completest system of the 
kind, containing all the improvements which expe- 
rience had from time to time suggested in the execu- 
tion of the preceding acts. By this act the trustees of 
the loan office were to lend out the bills on real secu- 
rity of at least double the value for a term of sixteen 
years, to be repaid in yearly quotas or instalments 
with interest. Thus one-sixteenth part of the prin- 
cipal was yearly paid back into the office, which made 
the payments easy to the borrower. The interest was 
applied to public services; the principal during the 

^ Timothy Pilkin : " Statistical View of the Commerce of the United 
States." 



8 , The Revolutionary Finances, 

first ten years was let out again to fresh borrowers.! 
The new borrowers from year to year were to have 
the money for only the remaining part of the term of 
sixteen years, repaying by fewer and proportionately 
larger instalments, and during the last six years of 
the sixteen the sums paid in were not to be reloaned, 
but the notes burned and destroyed ; so that at the end 
of the sixteen years the whole might be called in and 
burned, and the accounts completely settled. The 
trustees of the loan offices were taken from all the 
counties of the province ; their residence in different 
parts of the state giving them better opportunities for 
being acquainted with the value and circumstances of 
estates offered in mortgage. They were four years 
continued in office, accounted annually to committees 
of the Assembly, and at the expiration of that term 
they were to deliver up all moneys and securities in 
their hands to their successors before their bondsmen 
could be discharged." 

Various methods prevailed in the different colonies 
for issuing bills, but the Pennsylvania system was 
generally considered the best and safest; the paper 
was made a legal tender in the payment of debts, and 
generally maintained its original value, with slight 
fluctuations, caused by a rise in gold and silver when 
a larger quantity of these metals than usual was 
wanted for exportationJ: 

4. In the modern mode of making war, money is 
not less essential than valour in the field or wisdom in 
the cabinet./ The deepest purse decides the fate of 
nations as often as the longest sword. It early occurred 

* Sparks : " Life of Franklin." 



I 



The Revolutionary Finances. ^ 

to the founders of the American empire, that the- 
established revenues of Great Britain must eventually 
overbalance the sudden and impetuous sallies of men 
contending for freedom, on the spur of the occasion, 
and without the permanent means of defence; but 
how to remedy the evil puzzled their wisest politicians. 
/Gold and silver, so far as was known, had not a physi- 
cal existence in the country in any quantity equal to 
the demands of war, nor could they be procured from 
abroad, as the channels of commerce had been pre- 
viously shut by the voluntary association of Congress 
to suspend foreign trade. America having never been 
much taxed in any direct way, and being without 
established governments, and especially as she was> 
contending against what was lately lawful authority, 
could not immediately proceed to taxation. Besides, 
as the contest was on the subject of taxation, the 
laying on of taxes adequate to the exigencies of war^ 
even though it had been practicable, would have been 
impolitic. The only plausible expedient remaining in 
tlieir power to adopt was the emission of bills of credit 
representing specie, under a public engagement to 
ultin.ately sink them in taxes or exchange them for 
g )ld or silver^/ 

5. Pelatiah Webster, who wrote a series of Essays 
during and subsequent to the war, which were full of 
wisdom, and plethoric with italics, — a man well ac- 
quainted with the resources and financial condition 
of the colonists, — says the current cash just before the 
war was commonly estimated at about $30,000,000, 
though the real sum did not probably exceed 

^ Ramjay : " History of the American Revolution," 



10 The Revolutionary Finances. 

$12,000,000— of which about $5,000,000 was gold 
and silver.^ Colonial bills formed the chief part of the 
circulating medium^ 

^ Lord Sheffield — ''Observations on the Commerce of America" — 
estimated the specie in the colonies prior to 1775 at about $9,000,000 ; 
Blodgett (" Manual") at about four millions. This latter is no doubt 
much nearest the truth. — (Both cited in Seybert's Statistics.) 



The Revolutionary Finances, H 



II. 

When, therefore, the Second Continental Congress 
^ — an immortal body ! — addressed itself to a considera- 
tion of the finances, almost immediately upon its 
meeting. May 10th 1775, nothing was more natural 
and probable than a prompt resort to paper money. 
First, it provided for the crea_tipn of an armW Having 
done this, and entirely conscious that the supply of 
cash — (cash is a good word : a better than either 
specie or coin, though the latter has a ringing sound, 
cash being defined by Johnson to be " money ; properly 
■ready money ; money in the chest or at hand ;" a good 
thing to have and a sure friend) ^ — the members of the 
Congress being entirely aware, then, that the supply 
of cash was inadequate even for the current and ordi- 
nary business of the colonists, immediately betook 
themselves to Bills of Credit, of which on the 22d 
of June they ordered an emission of two millions of 
dollars ; and in July another emission of one million^ 
Two joint treasurers ^ were appointed as custodians of 

^ The original administrators or custodians of the funds of the Conti- 
nental Congress were two joint-treasurers, appointed July 29th 1775 5 
subsequently, August 6th 1776, one of these resigned, and one only was 
continued in office. In February 1776, a committee of Congress, five 
in number, was appointed to superintend the treasury ; and in July 
1779, a Board of Treasury was constituted ; its principal officers con- 
sisted of five commissioners, two of whom were members of Congress 
and three were not ; its duties were, the general management of the 



A^ 



12 Revolutionary Finances, 

these and other funds of Congress, — and they were 
authorized and directed, whenever they should have 
gold and silver in their hands for the redemption of 
the bills, to advertise the fact ; thereby signifying that 
they were ready to pay it to such holders as desired 
an exchange. Henry Phillips says he has made dili- 
gent search — as perhaps some bill-holders did during 
the war — for an advertisement of the treasurers, and 
found none ! No doubt. However, fhe Congress, pro- 
ceeding apparently upon the belief — and perhaps they 
did believe — that gold and silver could be procured for 
at any rate partial conversions, and also to provide 
funds for the ultimate redemption and sinking of the 
bills, made an estimate of the supposed population of 
the colonies, including therein botli negroes and mu- 



finances of the United States, the preparation of estimates of expendi- 
tures, the auditing of accounts and the like. But this Board of Treasury- 
was found to be an exceedingly cumbrous and inefficient body, and gave 
way, in February 1781, to a Superintendent of Finance — Robert Mor- 
ris — whose duties were substantially those exercised by the five com- 
missioners, and more extensive in some important particulars, as will 
hereafter appear. On the retirement of Mr. Morris, 1784, a Board of 
Treasury was re-established ; this time consisting, however, of but three 
members, and its powers included those of the Superintendent also. 
The Treasury Department of the United States was organized under the 
Act of Congress of 2d September 1789 ; next to the President, the prin- 
cipal officer of this department is the most important personage in the 
government, though technically outranked by the Secretary of State. 
lie digests and prepares plans for the improvement and management of 
the revenue and for the support of public credit ; prepares and reports 
estimates of the public revenues and the public expenditures ; collects 
the revenue, and grants, in the way prescribed by law, all warrants for 
moneys paid out of the treasury ; is the only member of the Cabinet 
who makes annual reports directly to Congress ; he appoints a multi- 
tude of subordinates, and exercises large and varied powers generally 
in connection with his office. 



Revolutionary Finances, 13 

lattoes, and allotted taxes among them in proportions 
based upon that estimate : the bills to be received in 
payment of the taxes (which were of course to be laid 
by the local assemblies of the states, the Congress 
having no authority to do any such thing), and the 
receipts into the state treasuries to be paid into the 
continental treasury in four yearly instalments, the 
first to become due in November 1779 ; it being the 
expectation that long before the periodjsiarrived for the 
first payment the war would be ended/ Exclusive of 
slaves at the South the estimate of population was this ; 
New Hampshire, 200,000; Massachusetts, 352,000; 
Ehode Island, 58,000; Connecticut, 202,000; New 
York, 238,000; New Jersey, 138,000; Pennsylvania, 
341,000; Delaware, 37,000; Maryland, 174,000; Vir- 
ginia, 300,000; North Carolina, 181,000; South Caro- 
lina, 93,000 ; Georgia (unrepresented at the date of 
this estimate), 27,000 : total, 2,243,000. Add 500,000 
slaves, and the ultimate was 2,743,000. It was upon 
the basis of this estimate that all the taxes and ex- 
penses of the war were distributed among the states ;y 
it was conjectural, of course, and although some of the 
states complained that it was unequal, and Congress 
recommended them to take efficient means to arrive at 
a correct knowledge of the numbers of their inhabit- 
ants, no enumeration was made. In 1782, however, 
the authorities of New Hampshire caused a census of 
the state* to be taken, and found the actual population 
to be but 82,000 souls. 

'The bills authorized in June did not get into circu- 
lation until August. They were received by the public 
with great favour. They circulated at the par of gold ; 



14 The Revolutionary Finances. 

^' that the endangered liberties of America ought to be 
defended, and that the credit of their paper was essen- 
tial to a proper defence," were the opinions engraven 
on the hearts of a great majority of the people. It 
was a point of honour, and was considered as a part of 
duty, to take the bills freely at their full valuej While 
the ministry of England were puzzling themselves for 
new taxes and funds on which to raise their supplies, 
Congress raised theirs by resolution."^ 

On the 29th of November following — estimates hav- 
ing been made of the expenses already incurred, and 
of those probable to accrue up to the 10th of June 
1776, "in the defence of America," Congress resolved 
upon a further emission of three millions, upon the 
same plan as of the issues authorized in June and July. 
In calculating the estimates to June 1776, Congress 
proceeded upon the expectation then prevailing, that 
by that time a reconciliation would be effected with 
the Crown, which, as the reader is entirely aware, did 
not happen. 

^ Ramsay. 



The Revolutionary Finances, 15 



III. 

February 17th, May 9th and 27th, July 22d, Au- 
gust 13th, November 2d, and December 28th 1776, 
additional emissions were ordered ; the aggregate for 
the year being nineteen millions, and the whole emis- 
sions to the 1st of January 1777, were twenty-five 
millions. " The United States for a considerable time 
derived as much benefit from this paper creation of 
their own, though without any established funds for 
its support or redemption, as would have resulted to 
them from the free gift of as many Mexican dollars. 
But there was a point both in time and quantity be- 
yond which this congressional alchemy ceased to ope- 
rate. That time w^as about eighteen months from the 
date of their first issue, and that quantity about twenty 
millions of dollars." ^ 

2. vBut long before the expiration of the year, Con- 
gress began to realize the importance of some other 
means of financial supply than continued emissions of 
paper dollars^ Though the bills were not actually 
depreciated, they began to be seriously discredited at 
a period not long subsequent to the " Declaration of 
Independence." That act had wrought a radical change 
in the objects of the war, and was certain indefinitely 
to prolong it, and just as certain indefinitely to increase 

^ Ramsay. 



16 The Revolutionary Finances, 



the expenditures. 'It began to be widely apprehended 
that the cost of liberty is something more than vigi- 
lance ; it is a considerable percentage of the income of 
the people. A good many whigs, even in those days of 
patriotism and sacrifice, were almost as anxious about 
their pocket-books as they were about their liberties, 
and realized — as men in these degenerate days do- 
that liberty without money is like a nobleman without 
an estate, — the mere shadow of a lord. They received 
the bills with some reluctance, and paid them out as 
promptly as was consistent with a respectable regard 
for the cause. Gold and silver disappeared, and prices 
advanced, which is but another way of saying that 
the circulation is superabundant, or is in bad credit, or 
both. " The stock of hard money which we possessed 
in an ample degree at the beginning of the war, soon 
flowed into Europe for supplies of arms, ammunition, ' 
and other necessaries, which we were not in the habit 
of manufacturing for ourselves. The produce of our 
soil, attempted to be carried in our own bottoms to 
Europe, fell — two-thirds of it — into the hands of our 
enemies, who were masters of the sea ; the other third 
illy sufficed to procure the necessary implements of 
war, so that no returns of money supplied the place 
of that which had gone off. A paper medium com- 
pleted the exile of the hard money ; in the later stages 
of the war we were, for years together, without seeing 
a single coin of the precious metals in circulation."^ 
Contractors were multiplying, and those persons who 

* Thomas Jefferson. 



n 



The Revolutionary Finances. 17 

do all sorts of chores for the public and are paid in 
commissions, were far more numerous in Revolution- 
ary days than now; seeing that almost the whole 
purchases of supplies for the armies were made upon 
commission, and the percentages allowed were more 
than liberal — they were extravagant. " What shall I 
say," asked a curious and indignant observer, in a com- 
munication to one of the newspapers,^ ^'what shall 
I say of the commissions allowed to quartermasters 
and commissaries, with their hosts of deputies ? I am 
far from impeaching every man who handles public 
money, but look into every county in this and the 
neighbouring states, and see the change in the man- 
ners of the deputies in the staff departments. Come 
with me to a public sale. The man of ancient patri- 
monial estate is outbid for everything by an assistant- 
deputy quartermaster's clerk ! See him lay down his 
— I retract the word — your tens of thousands for a 
farm. There is no end to his purchases. And unless 
you put an end to the amazing perquisites of your 
staff otficers" — many of whom, the writer alleged, were 
taken out of the billiard-rooms — '^ I expect in a few 
years to see the delegates in Congress tenants of their 
own quartermasters and commissaries !" Briefly, then, 
resuming our narrative, the more sagacious began 
clearly to forecast the future, and to prepare for it. 
But,— 

3. Congress dealt with these people as summarily 
as they knew how, or as they had power to deal with 

^ ** Pennsylvania Packet." 



18 The Revolutionary Finances. 

them, for m those days states' rights were things and 
not words; in very truth the states had so many 
rights they did not know exactly what to do with 
them all; still they preferred keeping to delegating 
them, and suffered countless present ills rather than 
submit to others that might be worse : so Congress, 
limited, and one might say almost shackled, could 
only indulge a sort of political excommunication— 
not upon admitted authority, however — but a very 
powerful and effective kind of excommunication after 
all. ''Any person who shall hereafter be so lost to all 
virtue and regard for his country as to refuse the bills 
or obstruct and discourage their currency or circula- 
tion, shall be deemed, published and treated as an 
enemy of the country, and precluded from all trade 
and intercourse with its inhabitants."^ Concerning 
which we shall see more hereafter. 

4. 'Congress had no power to tax; but seeing that 
something had to be done besides emitting bills and 
excommunicating infidels who did not believe them 
the equal of cash, a loan was proposed [October 3d 
1776] of five millions of dollars. This was no inter- 
ference with the rights of the states — a beggar may 
borrow if any one be willing to lend. Interest at four 
per cent, per annum was offered, and for the conve- 
nience of lenders, loan offices were to be established 
in the several colonies, to be in the charge and keeping 
of commissioners selected by the local authorities, 
for Congress did not feel authorized to designate even 
such officers. The commissioners were to have one- 

* Resolution of Congress, January Uth 1776. 



The Revolutionary Finances, 19 

eighth of one per cent, upon the whole sums brought 
into their respective offices, in Heu of all other claims 
and demands for transacting the loan businessjj not a 
very lucrative compensation, seeing how small the 
receipts were and the money seriously depreciated. 
'This was the beginning of the loan-office system. The 
certificates of loans were to be of the denominations 
of three hundred, four hundred, five hundred, six 
hundred and one thousand dollars ; and Congress, with 
a characteristic attention to details, directed not only 
the devices which were to be engraved upon them but 
also the colours in which they were to be printed. 
GouvERNEUR MoRRis alleges that these certificates on 
their first appearance were in less repute than the bills 
of credit] " for causes not necessary to be mentioned, 
as they are fresh in everybody's memory."^ 'it was 
hoped and expected by Congress that as the certifi- 
cates bore interest they would absorb the bills and be 
hoarded. The result was otherwise. Being made 
payable to bearer, they were not only transferable but 
actually were transferred from hand to hand, and in- 
stead of checking or diminishing the depreciation, 
largely contributed to promote it/ 

5. Lotteries 'in the revolutionary age were not in 
the disrepute which attaches to them in this generation_^ 
and even if they had been, it is quite likely Congress 
would have resorted to one if it had promised any 
considerable results. 'At any rate a scheme of much 
magnitude was framed, and a good deal of time and 
attention were devoted to it. It dragged its slow 

1 " Pennsylvania Packet," April 11th 1781. 



20 The Revolutionary Finances, 

length along through several years, and was substan- 
tially a failure, though a good many people, ambitious 
of sudden and accidental fortune, bought tickets. The- 
lottery certificates were among the transferable securi- 
ties of the time^j 

6. 'The states separately emitted large quantities 
of bills of credit. As they swelled the volume of the 
circulation, and were in as good repute — being based 
upon substantially the same security — as the conti- 
nental bills, they were potent in hurrying on the dis- 
credit and then the depreciation of the whole mass of 
the currency. Against these emissions Congress, in 
future years, appealed fervently and vainly. Though 
the state assemblies had power to tax, taxes were 
unpopular; and if there is anythhig in the world an 
American legislator holds in abhorrence, it is personal 
or political unpopularity. So the states didn't tax, 
but they printed with unflagging vigour/ Private 
persons, seeing the mania for paper money, issued 
circulating notes ; and some of these were quite as 
good and some of them were a good deal better than 
the bills either of the state governments or of Con- 
gress, but they were prohibited under severe penalties. 
The counterfeiters were active, and their issues became 
a wide-spread and formidable evil. The English govern- 
ment — which seems to have a mania for counterfeiting 
the paper money of its enemies — entered into compe- 
tition with private criminals in this highly civilized 
way of carrying on the war. 

7. In this place it may be as well to advert to the 
probable amount of the issues of the states. It is im- 
possible accurately to state their amount; Thomas 



The Revolutionary Finances, 21 

Jefferson estimated them at two hundred millions, 
an estimate which the table in the appendix shows to 
iJe very near the truth ; and the circulating value of 
the state bills was, in general, neither greater nor less 
than that of the Continental emissions. 

'8. The whole issues of Congress, from June 1775 
to January 1st 1777, aggregated twenty-five millions 
of dollars, and their purchasing power, during the 
campaigns of '75 and '76, was equivalent to that of 
specie, though, in consequence of the great abundance 
of paper, prices had steadily advanced^ 



22 The Revolutionary Finances. 



I The beginning of 1777 found the bills at an open ■ 
discount of not less than one hundred per cenW 
Notwithstanding the declaration of Congress, that 
"they ought to pass current in all payments and deal- 
ings, and be deemed equal in value to the Spanish- 
milled dollars," their credit was steadily downward. 
I "The continental money," said the resolutions of 
Congress on the subject (dated January 14th 1777), 
" ought to be supported at the full value expressed in 
the respective bills, by the people of the states, who 
stand bound to redeem them according to the like 
value, and also to guard against the artifices of 
the enemies of liberty, who impair the credit of the 
bills hy raising the nominal value of gold and silver^ 
At the same time, as a remedy for the depreciation, the 
state legislatures were recommended to pass laws in- 
flicting penalties and forfeitures upon persons who sold 
their land sand merchandises for continental bills rated 
at a specie value, and to make them a lawful tender 
in the payment of both public and private debtsjj debts 
payable in sterling money to be discharged with conti- 
nental dollars at 4^. ^d. sterHng per dollar (that is to 
say, at par), and in discharge of all other debts and 
contracts to pass as the equivalent of the Spanish milled 
dollar, a refusal of the bills at these alleged values to 



The Revohitionari/ Finances, 23 

operate as an extinguishment of the debt. To these 
appeals the states responded, with what effect will be 
hereafter seen. 

2. The campaign of 1777 was conducted with paper 
money, and was not seriously affected by its decreased 
and fluctuating value. At the beginning of the year 
two paper dollars were equal to one hard dollar, and 
in December one hard dollar was worth four paper 
ones. The emissions authorized in the mean time 
were thirteen millions, worth at a cash valuation about 
three millions. A great quantity of counterfeits were 
put into circulation ; this evil became so great that it 
was found necessary at a later period officially to with- 
draw from circulation two of the continental emissions, 
amountino- in the aoj2rre2;ate to ten millions of dollars. 

\ 3. Congress, with an earnestness almost pathetic, 
appealed to the legislatures not only to refrain from 
further local issues of bills, but to call in and cancel 
those already emitted ; they were urged to take mea- 
sures for the limitation of prices, and to authorize the 
seizure of supplies in the hands of forestallers and 
engrossers and pay for them at fixed rates, and to tax 
their peoplej Taxes to the amount of fi\e millions, to 
be raised during the year 1778, were allotted among 
the states : New Hampshire was called upon for 
$200,000; Rhode Island for $100,000; Massachu- 
setts, $820,000; Connecticut, $600,000; New York, 
$200,000; New Jersey, $270,000; Pennsylvania, 
$620,000; Delaware, $60,000; Maryland, $520,000; 
North Carolina, $250,000; South Carolina, $500,000; 
Georgia, $60,000. Hitherto, said the address of Con- 
gress to the legislatures, ^' we have not burdened our 



24 The Revolutionary Finances, 

fellow-citizens with taxes, but have raised the necessary 
supplies on the public faith ; and the same method has 
been embraced by the respective states to answer their 
internal wants. The currency is by these expedients 
multiplied beyond good policy, and its comparative 
value is proportionately reduced. To this cause, con- 
spiring with the arts of open and secret enemies — the 
shameful avidity of professed friends and scarcity of 
foreign commodities — are we to ascribe the deprecia- 
tion of our currency. The consequences to be appre- 
hended are equally obvious and alarming; they tend 
to the depravity of morals, the decay of public virtue, 
a precarious supply for the war, debasement of the 
public faith, injustice to individuals, and the destruc- 
tion of the honour, safety and independence of the 
United States." Hitherto spared from taxes, the 
people were now called upon, " with cheerful hearts 
to contribute according to their circumstances." But 
the sums set down against the respective states were 
not to be considered as their real proportions, but 
being paid into the common treasury were to be 
placed to their credit, and interest allowed at the rate 
of six per centum per annum. 

4. Signal advantages — so Congress said — having 
been derived from the establishment of the continental 
loan offices, it was recommended, at the same time, 
that the system be further extended by the opening 
of subscriptions in all the towns, counties and districts 
of the several states. 



The Revohdionary Finances. 25 



V. 

' Seeing with extreme and just alarm the public 
and extensive depreciation of the currency, Congress 
and the people, at the beginning of 1777, cast about 
for prompt and efficient remedies. We have already 
seen the declaration of Congress in January 1776, 
that persons refusing the bills should be treated as 
public enemies, and that at the period of which we 
are now writing penal laws were recommended against 
those who made a discrimination against the conti- 
nental currency. Excommunication not having been 
sufficiently effective, it was now determined to proceed 
to punishment^ 

2. ' " The fatal error that the credit and currency of 
the continental money could be kept up and supported 
by acts of compulsion, entered so deep into the mind 
of Congress and of all departments of administration 
through the states, that no considerations of justice, 
religion or policy, or evep experience of its utter ineffi- 
cacy, could eradicate itjj it seemed to be a kind of ob- 
stinate delirium, totally deaf to every argument drawn 
from justice and right, from its natural tendency and 
mischief, from common sense and even common safety. 
Congress began, as early as 11th January 1776. to 
hold up and recommend that maxim of maniaism, 
when continental money was but five months old. 
Congress then resolved that whoever should refuse to 
receive in payment the continental bills, should be 



26 The Revolutionary Finances, 

deemed and treated as an enemy of his country, and 
be precluded from all trade and intercourse with the 
inhabitants; i. e. should be outlawed — which is the 
severest penalty (except life and limb) known to our 
laws. This ruinous principle continued in practice for 
five successive years, and appeared in all shapes and 
forms, in tender acts, in limitations of prices, in awful 
and threatening declarations, in penal laws with dread- 
ful and ruinous punishments, and in every other way 
that could be devised ; and all executed with a relent- 
less severity by the highest authorities then in being, 
to wit : by Congress," by assemblies and conventions of 
the states, by committees of inspection (whose powers 
were in those days nearly sovereign), and even by 
military force; and though men of all descriptions 
stood trembling before this monster without daring to 
lift a hand against it, yet its unrestrained energy was 
ever found ineffectual to its purposes, but in every 
instance increased the evils it was designed to remedy, 
and destroyed the benefits it was intended to promote ; 
at best its utmost effect was like that of water sprinkled 
upon a blacksmith's forge, which indeed deadens the 
flame, but never fails to increase the heat and force of 
the internal fire. Many thousand families, of full and 
easy fortunes, were ruined by these fatal measures, 
and lie in ruins to this day, without the least benefit 
to the country, or to the great cause in which we were 
then engaged."^ But others, perhaps as competent 
to judge, thought the tender and limitation laws the 
efficient instruments that saved the country. And 
who shall say these were not the true prophets ? Un- 

^ Pelatiah Webster: Essay printed in 1790. 



The Revolutionary Finances, 27 

doubtedly those laws were cruel in spirit and execu- 
tion; less rigorous and distressing remedies might 
have been equally potent in curing the evils ; we can- 
not say, for they were not tried, or being attempted, 
were found impracticable of execution. What is cer- 
tain is, that while the tender and limitation acts did 
not and could not completely prevail against the inex- 
orable laws of traffic, they were very powerful in their 
effects, and for some brief time, at any rate, preserved 
a degree of credit for the bills even after they were 
utterly valueless. Now, nothing less than this can 
truly be said^ And when one reads the history of 
those disastrous and most distressful days, — when tories 
and savages from over the sea, as well as savages from 
the wilds and jungles of America, were joined toge- 
ther in despoiling and desolating the country, when 
counterfeiting and lying were added by our enemies to 
their swords and rifles as means of war upon our an- 
cestors : now YOU, sitting — so to speak, but metaphor- 
ically only of course — under your own vine and fig- 
tree, with none to molest or make you afraid ; Mill, 
RiCARDO and Amasa Walker (wise, all of them, in 
their day and generation, but none of them there pre- 
sent to partake in the calamities and griefs of the war), 
saying sage judicial things and impressing you with 
the soundness of their philosophy on the currency 
question, — recall the fear and distress of the people of 
America in those days of trial, their poverty, loss of 
trade, homes destroyed, fields and farms laid waste, 
open enemies assailing them with arms, and secret, 
insidious and unscrupulous enemies lying in wait for 
them at their very doors ; recall all these surroundings 



"28 The Revolutionary Finances, 

of danger and difficulty, and if you be a financier, — 
:and no doubt you are, — heaven forefend that anything 
here said should imply a suspicion to the contrary, — 
after all, what couM have been done other than what 
was done ? The fathers, driven to extremity, resorted 
to those measures which promised the most immediate 
and certain relief. The intrinsic error was in the use 
of paper money ; for true it is that paper money being 
in the nature of evil, its use must ever be attended 
with abuse ; and while nobody doubts the vast influ- 
ence it has exerted in modifying the whole structure 
of modern society, and the powerful effective instru- 
ment it has been in the creation of material wealth, 
the untold suffering it has inflicted upon people of all 
ranks and conditions in every country in which it has 
been used, is not at all compensated by the good it 
has wrought, if indeed it has wrought any. 

3. The fathers of the republic, being reduced then 
to the necessity of emitting paper money, notwith- 
standing the evils that followed in its track, were 
bound to use every means to support its credit. All 
considerations other than The Safety of the State 
must of necessity give way. Public and private jus- 
tice were sacrificed, corruption of manners, extrava- 
gance, improvidence, disgraceful habits of suspicion, 
espionage and cheating, were introduced among a 
really virtuous people^ 

4. The first of the pernicious system of laws which 
Webster condemned so trenchantly were those making 
the bills a legal tender in payment of debts/ Congress 
recommended the states to do this, and Khode Island 
led off in August 1775 in doing it. The other states, 



The Revolutionary Finances. 29^ 

one by one, did the same, and all attached severe 
penalties for refusing the money ^t its nominal value. 
So long as the bills remained at par, but little mischief 
Resulted ; when they were in course of depreciation 
great evils and hardships followed. A well-known 
historian has described the general operation of the 
continuously-enlarging volume of paper, and at the 
same time the legal tender. The possessors of the 
bills, he says, who either from sagacity or accident 
conjectured rightly as to their ultimate fate, or finding 
that they daily lost a part of their value, were perpetu- 
ally in quest of bargains. As they knew that Congress 
must make further emissions to supply the armies, 
they concluded that it would be better to purchase up 
property of any kind than to lay up their money, 
while the deceitful sound of large nominal sums 
tempted many possessors of real property to sell, some 
of them opulent persons of ancient family ; and on the 
other hand, again, some hoarded up the bills in prefer- 
ence to buying solid property at supposed extravagant 
prices. Many bold speculators made fortunes by run- 
ning in debt beyond their present abilities, and paid 
their debts in a depreciating currency ; the merchants 
and moneyed men were great losers by the legal ten- 
der. It changed the nature of obligations so far that 
he was counted an honest man who on principle de- 
layed to pay his debts. It disposed those who were 
losers by the legal tender, and who preferred their 
money to the liberties of America, to wish for a re-es- 
tablishment of British government, and filled others 
with murmurings and bitter complaints against the 
ruling powers. The public-spirited, who were sincere 



30 The Revolutionary Finances, 

in their declarations of devoting life and fortune to 
the cause of their country, patiently submitted to their 
hardships from a conviction that the cause of liberty 
required the sacrifice.^ 

All classes were infected. The paper produced a 
rage for speculation. The mechanic, the farmer, the 
lawyer, physician, members of Congress, and in some 
places even a few of the clergy, were contaminated. 
The morals of the people were corrupted beyond any- 
thing that could have been believed prior to the evept. 
All ties of honour, blood, gratitude, humanity and. 
justice were dissolved. Old debts were paid when 
the paper money was more than seventy for one. 
Brothers defrauded brothers, children their parents 
and parents their children. Widows, orphans and 
others were paid for money lent in specie with depre- 
ciated paper, and were compelled to receive it.^ 

That the helpless part of the community were legis- 
latively deprived of their property was among the 
lesser evils which resulted from the legal tender of the 
depreciated bills of credit. The iniquity of the laws 
estranged the minds of many citizens from the habits 
and love of justice. The mounds which government 
had erected to secure the observance of honesty in the 
commercial intercourse of man with man were broken 
down. Truth, honour and justice were swept away 
by the overwhelming deluge of legal iniquity.^ 

'The tender laws were substantially the same in all 
the states ; and their vital principle was, that a tender 

^ Ramsay : " History of South Carolina.'' 

^ Gordon : " History of the War of the American Revolution." 

' Ramsay : *' History of the American Revolution." 



The Revolutionary Finances, 31 

of the bills, whether accepted or refused, equally 
worked an extinguishment of the debt. They were 
repealed in the early part of the year 1781 ; but to 
the very last, and in despite of the known misery and 
injustice wrought by them, they had warm and per- 
sistent advocates^— they had been revised during the 
spring of 1780 to conform them to the *'forty-for-one" 
scheme of Congress of March 18th of that year, 
though at the very moment of revision the deprecia- 
tion was ten to twenty-fold in excess of the rate fixed 
by law ; but in Maryland, and perhaps in other states, 
contracts to be discharged in gold and silver were 
made lawful, which in some measure at any rate 
relieved the people. 

It may be observed here : it seems impossible to 
doubt indeed — that the framers of the constitution 
from personal knowledge aware of the intrinsic vicious- 
ness of legal tender paper, intended to prevent its use 
-by constitutional prohibition.^ 

r' The debate in the Federal Convention is here cited in support of 
this observation : 
Mr. GouvERNECR Morris moved to strike out " and emit bills on 
the credit of the United States." If the United States had credit such 
! -bills would be unnecessary ; if they had not, unjust and useless. 
Mr. Butler seconds the motion. 

Mr. Madison : Will it not be sufficient to prohibit the making them a 
I tender? This will remove the temptation to emit them with unjust 
' views. And promissory notes in that shape may in some emergencies 
be best. 

Mr. Gouverneur Morris : Striking out the words will leave room 
still for the notes of a responsible minister, which will do all the good 
without the mischief The moneyed interest will oppose the plan of 
government if paper emissions be not prohibited. 

Mr. GoRHAM was for striking out without inserting any prohibition. 
If the words stand they may suggest and lead to the measure. 

3 



32 The Revolutionary Finances. 

5. The second of the system of laws for supporting 
the value, or more properly the purchasing power of 



Mr. Mason had doubts on the subject. Congress, he thought, would 
not have the power unless it were expressed — though he had a mortal 
hatred to paper money, yet as he could not foresee all emergencies, he 
was unwilling to tie the hands of the legislature. He observed that the 
late war could not have been carried on had such a prohibition existed. 

Mr. GoRHAM : The power, as far as it will be safe or necessary, is 
involved in that of borrowing. 

Mr. Mercer was a friend to paper money, though in the present state 
and temper of America he should neither propose nor approve of such 
a measure. He was consequently opposed to a prohibition of it alto- 
gether. It will stamp suspicion on the government to deny it a discre- 
tion on this point. It was impolitic also to excite the opposition of all 
those who were friends to paper money. The people of property would 
be sure to be on the side of the plan, and it was impolitic to purchase 
their further attachment with the loss of the opposite class of citizens. 

Mr. Ellsworth thought this a favourable moment to shut and bar the 
door against paper momey. The mischiefs of the various experiments 
which had been made were now fresh in the public mind, and had 
excited the disgust of all the respectable part of America. By with- 
holding the power from the new government, more influence would be 
gained to it than by almost anything else. Paper money can in no cas& 
be necessary. Give the government credit and other resources will 
follow. The power may do harm — never good. 

Mr. Randolph, notwithstanding his antipathy to paper money, could- 
not agree to strike out the words, as he could not foresee all the occa- 
sions that might arise. 

Mr. Wilson : It will have a most salutary influence on the credit of 
the United States to remove all possibility of paper money. This expe- 
dient can never succeed whilst its mischiefs are remembered ; and as 
long as it can be resorted to, it will be a bar to other resources. 

Mr. Butler remarked that paper was a legal tender in no country in 
Europe. He was urgent for disarming the government of such a power. 

Mr. Mason was still averse to tying the hands of the legislature 
altogether. If there was no example in Europe, as just remarked, it 
might be observed, on the other side, that there was none in which the 
government was restrained on this head. 

Mr. Reed thought the words if not struck out would be as alarming 
as the mark of the Beast in RevelatioD. 



The Revolutionary Finances. 33 

the bills, were those for the limitation of prices. The 
deluge — for it could be called nothing else — of paper 
money which flooded the country, steadily and rapidly 
raised the prices of commodities of every kindy The 
rise was attended by embarrassing fluctuations; they 
made the poor poorer, if they did not make the rich 
richer, as indeed in many cases they did. The people, 
feeling the pressure constantly grow greater, with the 
income of this week able to purchase less than with 
the income of the last week, and this constantly recur- 
ring, became restless, impatient, clamorous and even 
threatening. They were not political economists, and 
could not trace the trouble to its real source, but natu- 
rally enough charged it upon forestallers, engrossers 
and the tories. Having arrived at this conclusion — 
and there ivere bulls and speculators, forestallers, en- 
grossers and " withholders" in those days — they cast 
about for a remedy. | If prices could be kept down the 
trouble would be prevented, — anybody could see that 
Why not limit prices, then ? This idea seems to have 
originated in New England ; and Congress, impressed 
with a belief that limitations would be effective in sus- 
taining the bills, seized upon the New England idea, 

Mr. Langdon had rather reject the whole plan than retain the three 
words, " and emit bills." 

Nine states voted to strike out ; two states to retain. Virginia voted 
in the affirmative, and in explanation of his vote with his state Mr. 
Madison appends a note, thus : " The vote in the affirmative by Virginia 
was occasioned by the acquiescence of Mr. Madison, who became satis- 
fied that striking out the words would not disable the government from 
the use of public notes, as far as they could be safe and proper ; and 
would only cut off the pretext for &, paper currency, and particularly for 
making the bills a tender either for public or private debts." — See ^^ 
Madison Papers, iii. 1343, 1344, 1345, 1346. y 



34 The Revolutionary Finances, 

and recommended it to the states [November 2 2d 
1777], for their immediate adoption, and renewed it 
in respect of various details during the ensuing two 
years^y Apply the regulations, said Congress in sub- 
stance, to the prices of labour, to manufactures, internal 
produce and imported commodities/ to the charges of 
innkeepers and to land and water carriage : limit the 
number of retailers in the counties, and make them 
take out licenses to observe the laws made for their 
regulation ; let such persons as have no licenses be 
restrained from purchasing greater quantities of cloth- 
ing and provisions than are necessary for family use, — 
and upon offenders against these law^s let such penal- 
ties be inflicted as will brand them with indelible infamy I 
Seize and forfeit the stores of forestallers, engrossers 
and withholders ; seize the supplies also of any per- 
sons who have larger quantities of commodities than 
are competent for the private annual consumption of 
their families ; and pay such prices as you shall think 
proper. The excessive spirit of sharping and extor- 
tion was to be put down most certainly. '' We are 
<.convinced," said Congress in January 1779, "that there 
is not so much diligence used in detecting and reform- 
ing abuses as in committing and complaining of them !" 
And later in the same year — November — Congress de- 
clared that the fluctuating state of prices not only 
caused inequality and injustice' in private dealings and 
in procuring the public supplies, but rendered it im- 
practicable to make proper estimates for future ex- 
penses, and to ^^ equitably the salaries of employees 
of the United States ; that as the estimates upon which 

^ Military stores to be excepted, however. 



The Revolutionary Finances. 35 

the requisitions for taxes upon the states were based 
proceeded upon the principle that the prices of com- 
modities necessary for the public use should not exceed 
twenty-fold of the former prices, it was urged upon 
the states to enact laws for a general limitation in ac- 
cordance therewith : that is to say, upon the principle, 
of an advance of twenty-fold above the prices current 
through the various seasons of the year 1774. Accord- 
ing to Thomas Jefferson's table the depreciation at 
the time these recommendations were made was thirty- 
eight for one. In order to hasten action, it was de- 
clared that those states failing to enact laws upon this 
principle before February 1st 1780, should be charged 
in the public accounts with the aggregate amount of 
the difference between prices paid from and after the 
1st of February next in such states and those paid in 
states enacting the laws. 

Some idea of the prevailing feeling of the people in 
relation to forestallers and engrossers may be gathered 
from the expressions of Washington on the subject. 
'^ Certain I am," he said, " that unless extortion, fore- 
stalling and other practices, which have crept in and 
become prevalent and injurious to the common cause, 
can meet with proper checks, we must inevitably sink 
under the load of accumulated oppression. To make 
and extort money in every shape that can be devised, 
and at the same time decry the value (of the paper 
money), seems to have become a mere business and 
epidemical disease, calling for the interposition of 
every good man and body of men." To President 
Reed he wrote : " It is most devoutly to be 'wished 
til at some happy expedient could be hit upon to 



c 



36 The Revolutionary Finances, 

restore the credit of our paper emissions, and punish 
the infamous practice of forestalling and engrossing 
such articles as are essentially necessary to the very 
existence of the army." 

It was in 1779 and 1780 that the popular excite- 
ment in relation to the limitation laws and the " nefa- 
rious practices of forestallers and engrossers'* was at 
at its wildest. Public meetings were held in the 
different cities and towns,, and violent penalties and 
denunciations — in addition to the legal penalties and 
forfeitures provided by the states in pursuance of 
the recommendations of Congress — were denounced 
against offenders. Not only were offenders denounced ; 
they were also punished in property and. person.^ 'It 
is enough to say — as Mr. Webster truly observes — 
that the local committees of safety and inspection 
exercised almost sovereign powers. Their decrees 
were rigorously executed, but notwithstanding the 

^ ^^ Rid the community of the monopolizers and extortioners who, like 
canker worms, are gnawing upon your vitals. TJiey are reducing the 
currency to waste paper by refusing to take it for many articles. We 
have borne with such wretches, but will bear no longer. Public examples 
are public benefits ! You then that have articles to sell, lower your 
prices; you that have houses to let, refuse not the currency for rent; for, 
inspired with the spirit of those heroes and patriots who have' struggled 
and bled for their country, and moved with the cries and distresses of the 
widow, the orphan and the necessitous, Boston shall no longer be your 
place of security !" — From a broadside poster, Boston, June 16th 1779. 
It contained also a caution — " Lawyers, keep yourselves to yourselves.'''' 
A second broadside about the same time contained these words : " THE 
CRISIS 1 Remember that the old spirit of opposition to the stamp act 
that first originated at Boston and sounded the alarm through the con- 
tinent, is not yet smothered, but shall soon burst with an unabating 
vengeance on the heads of monopolizers as it did on the odious stamp 
masters. By Heavens it shall not die !" /^ 



The Revolutionary Finances, 37 

Tiolence and stringency of the measures of repression, 
the depreciation pursued its inflexible course, though 
doubtless measurably restrained./ 

6. I Partaking of the character of the limitation laws 
were those laying embargoes upon the exportation of 
grains and provisionsy^ Congress alleged that such 
exportations occasioned serious difficulties in procuring 
supplies for the army, and by the capture of exporting 
vessels by British ships relieved the enemy from dis- 
tresses that would greatly have embarrassed his opera- 
tions. Declaring it absolutely necessary, therefore, that 
an embargo be immediately laid, and unwilling to 
await the action of the state legislatures — some of 
them distant from Congress, and assembling at differ- 
ent periods — lest the purposes of the embargo should 
be frustrated. Congress proceeded to lay a prohibition 
upon the exportation of wheat, corn, beef, pork, live- 
stock and other provisions, and recommended the states 
to enforce it with the necessary regulations. This was 
on the 8th of June 1778, and the embargo was to con- 
tinue in force till the 15th of the following November^ 
On the 2d of September Congress so far modified the 
prohibition as to allow provisions to be exported from 
Pennsylvania and the states south of Pennsylvania 
to eastern ports, for the use of the people of the 
Eastern States, but this permission having led to fraud- 
ulent clearances, on the 2d of October the states were 
recommended to grant no exemptions from the general 
operation of the laws, unless the shipper and every 
seaman and passenger on the vessel should solemnly 
«wear, without any mental reservation or equivoca- 
tion, that neither directly nor indirectly were they 



38 The Revolutionary Finances. 

concerned in any measure whatever that might tend 
to prevent the arrival of the vessel in the eastern port 
of destination, and the shipper was required also to 
agree before departure upon the price at which the 
flour or grain was to be delivered. Congress continued 
the prohibition from time to time, and the states aided 
by enacting the laws necessary to carry it into execu- 
tion. 




Revolutionary Finances. 39 



VI. 

Now, touching the confiscation acts ^ of the several 
states, it may as well be stated here as elsewhere 
that at various periods during the war, acts were 
passed by all of them to confiscate and sell, to se- 
quester, take possession of and lease the estates of 
the loyalists — that is to say, of the tories — and to apply 
the proceeds towards the redemption of certificates 
and bills of credit, or towards defraying the expenses 
of the war ; to enable debtors to pay into the state 
treasuries or loan offices paper money in discharge of 
their debts to British and tory creditors./ Under some 
of these laws many individuals were attainted by 
name, others were banished for ever from the country, 
and if found within the state were declared felons 
without benefit of clergy. In some states the estates 
and rtghts of married women, of widows and minors, 
and of persons who had died within the territories 
possessed by the British arms, were forfeited. Autho- 

^ The operation of the confiscation and tender laws was thus described 
by Daniel Dulaney, a citizen of London and a subject of the British 
Crown, and a refugee. He was the residuary legatee of Ann Tasker, 
who died at Annapolis, Maryland, in 1775, and the sum of Ann Taskbr's 
property, after paying other legatees, which belonged to Daniel Dula- 
ney, amounted to about £14,000 sterling, chiefly in outstanding debts 
due the estate. Daniel Dulaney had other property in Maryland, the 
whole of which, including Ann Tasker's legacy, was confiscated by act 
of the legislature, and sold for the benefit of the state, to the amount of 



H 



40 Revolutionary Finances, 

rity was given to the executive departments to require 
persons who adhered to the Crown to surrender them- 
selves by a given day and abide trials for high treason ; 
in failure of which the parties so required were attaint^ , 
ed, were subject to and suffered all the pains, penalties 
and forfeitures awarded against persons convicted of 
high treason. In New York a power was vested in 
the courts to prefer bills of indictment against persons 
alive or dead, who had adhered to the king or joined 
his fleets or armies; if in full life and reputed to hold 
or claim, or if dead to have held or claimed at the 
time of decease, real or personal estate. And upon 
notice or neglect to appear and traverse the indict- 
upwards of £70,000 current money. By public acts of the provincial 
convention and legislature, the executor of Ann Tasker (being the 
father of Daniel Dulaney) was prohibited from bringing suits for the 
recovery of the debts due to her estate; but by an act passed in Febru- 
ary 1777 bills of credit emitted by Congress and the state of Maryland 
were made a legal tender in payment of all debts at the rate of 4:S. &d. 
sterling per dollar, and a tender of such bills, whether accepted or 
refused by the creditor, or his or her executor or administrator, not 
only extinguished so much of the debt as was tendered, but the creditor 
refusing to deliver up the evidence of the debt to be cancelled upon 
demand, was thereby subject to have the same recovered upon an action 
of trover, together with damages for the detention. Under this act very 
large suras of legal tender paper money were tendered to the executor 
of Ann Tasker by sundry debtors of her estate, and the executor, to 
avoid the penalties he would have incurred under the law for refusing 
to receive it, as well as to escape the public ignominy and popular ven- 
geance he would otherwise have inevitably sustained, was compelled to 
receive the paper at the rate of 4s. 6d. sterling for each dollar, when in 
fact it was worth but one-fifth of that sum ; and the executor being 
compelled to make good to the other legatees their respective claims 
upon the estate of Ann Tasker, the whole loss fell upon Daniel Dula- 
ney, and amounted to about £10,000 sterling money of Great Britain ; 
and Daniel Dulaney sought to recover the real value of the debts due 
the estate of Ann Tasker and his other confiscated property, and suc- 
ceeded in doing neither. — MSS, in Pa. Hist. Society. 



The Revolutionary Finanees. 41 

ment, whether in full life or deceased, were respectively 
declared guilty of the oflfences charged and their estates 
forfeited, whether in possession, reversion or remainder. 
In some of the states confiscated property was applied 
to the purposes of public buildings and improvements ; 
in others it was appropriated as rewards to individuals 
for military services rendered during the war, and in 
one instance, property mortgaged to a British creditor 
was liberated from the encumbrance by a special act 
of the legislature as a provision for the representatives 
of the mortgagor, who had fallen in battle. 'Even after 
the war, in some of the states, the confiscation laws 
were acted upon, and new regulations made to carry 
them into effect. The British government paid to the 
loyalists about seventeen millions of dollars on account 
of losses sustained by them in consequence of these 
various enactments^ 

^ See the correspondence between Mr. Hammond, the British Minister, 
and Mr. Jefferson, Secretary of State, during Washington's adminis- 
tration, touching alleged failures in carrying out certain stipulations of 
the Treaty of Peace between Great Britain and the United States.— 
American State Papers: Foreign Relations. 



42 The Revolutionary Finances, 



VII. 



While Congress was struggling at home with the 
embarrassments always attending upon disordered 
finances, the cause of America found powerful friends 
and extensive helps among generous foreigners. 

2. Let us recount these : 

The efforts of Beaumarchais to engage his govern- 
ment to aid the colonists began so early as 1774. His 
versatile talents and indefatigable zeal were not with- 
out their due effect upon the French King and his pru- 
dent Minister of Foreign Affairs ; but the difficulty of 
assisting the colonists without compromising the peace- 
ful relations of England and France had indisposed 
them to give or lend the colonists anything — but their 
ears. Early in 1776, however, Beaumarchais devised 
the commercial disguise through which the French 
government might give aid and comfort to the enemies 
of England without the risk of being treated as one 
of the number. His project, the history of which fills 
one of the most romantic pages in the chronicles of the 
country, received the approval of Vergennes, and sud- 
denly, like a shifting scene in one of his dramas, a 
blazing sign proclaimed that the mysteriously-begotten 
firm of Rodriguez, Hortaling & Co. had established 
its headquarters in the Hotel d'Hollande, in Paris, and 
the author of the " Marriage of Figaro," who never did 
anything except in a grand way, was in less than a 



The Revolutionary Fiimnces. 43 

year the most extensive shipping-merchant in Europe. 
In the course of a few months, after he had brought 
the King to his views, several ships loaded with what 
the colonists most needed — cannon, mortars, shells, 
cannon-balls, small-arms, nearly three hundred thou- 
sand pounds of powder, and tents and clothing suffi- 
cient for 25,000 men — were despatched to the United 
States, to be in readiness for the approaching campaign 
of 1777, which was expected in England to put an 
end alike to the war and the callow young republic 
that was fighting for its existence. Before the summer 
of 1777, Beaumarchais was in advance for supplies to 
Congress nearly a million of dollars, for which he had 
counted upon prompt returns in tobacco and other 
merchantable products of the country. Unhappily 
the jealousy of Arthur Lee and the eccentricities of 
Beaumarchais rendered his operations completely un- 
intelligible to Congress. "Imagine," says De Lominie, 
in his admirable Life of Beaumarchais, ''imagine seri- 
ous Yankees, who had nearly all been traders before 
becoming soldiers, receiving cargo after cargo, which 
were frequently embarked by stealth during the night, 
and the invoices of which constantly presented some 
irregularities, and all this without any other letters 
of advice than the rather bombastic missives signed 
with the romantic name of Rodriguez, Hortaling & Co.^ 
in which Beaumarchais mixed protestations of enthu- 
siasm, offers of unlimited services and political advice^ 
with applications for tobacco, indigo or salt fish, and 
indeed with tirades, of which we may take the follow- 
ing as an example: Gentlemen, — Consider my hofise 
as the head of all operations useful to your cause in 



44 The Revolutionary Finances, 

Europe, and myself as the most zealous partisan of 
your nation, the soul of your successes, and a man 
profoundly filled with the respectful esteem with which 
I have the honour to he, etc., Kodriguez, Hoetaling 
& Co. — The calculating disposition of the Yankees 
naturally inclined them to think that so ardent and 
fantastic a being. — if after all such a being really ex- 
isted, — was nothing but a commercial comedy agreed 
upon between the French government and himself, 
and that they might in all security of conscience use 
of his supplies, read his amplifications, and dispense 
with sending him tobacco." Which they did. Beau- 
MARCHAis received neither tobacco, nor thanks, nor 
even a letter from Congress. His communications 
remained unanswered, his funds and credit were ex- 
hausted, and all his expectations of returns were dis- 
appointed. Congress persisted in treating him as a 
sort of Mrs. Harris, whose existence was more than 
doubtful. At last reduced to extremities, he sent to 
the United States a confidential agent, to obtain, if 
possible, some explanation of results so chilling to his 
enthusiasm, and for which he was so poorly prepa^^ed. 
This agent made ardent efforts to effect a settlement 
of the claims of his principal against the republic, 
but ineffectually, and it was not until long after the 
members of the Congress he had assisted, and Beau- 
MARCHAis himself, had gone " where the wicked cease 
from troubling and the weary are at rest," that his heirs 
obtained a final settlement with our government.^ Beau- 

^ See " Beaumarchais, the Merchant," a lecture delivered by John 
BiGELow before the Historical Society of New York, and printed by 
ScRiBNER 1871, from which this account of Beaumarchais is extracted. 



The Revolutioncu^ij Finances, 45 

MARCHAis's claim against the United States amounted 
to 4,547,593 livres, approximating to one million of 
dollars. A deduction of one million livres was made, 
and the remainder was paid; and in 1835 his heirs 
were allowed by the Congress of the United States a 
further sum of eight hundred thousand francs. 

3. Besides the assistance received through Beau- 
MARCHAis, the French government paid to the Ameri- 
can commissioners in Paris, previous to the treaty of 
1778, two millions of livres as a gratuity, and the 
Farmers-General of France loaned them a million. 

The aids received from France from the beginning 
to the end of the war, besides men and ships, are 
these: Previous to 1778, and including the loan of 
the Farmers-General 3,000,000 livres; in 1778 loan 
3,000,000 livres; in 1779 loan 1,000,000 livres; in 
1780 loan 4,000,000 livres; in 1781 loan 4,000,000 
livres; subsidy 6,000,000 livres; loan in Holland 
guaranteed by France 10,000,000 livres (5,000,000 
Dutch florins) ; in 1782 loan 6,000,000 livres; and in 
1783 loan 6,000,000 livres.' That is to say, the 

^ The six million livres borrowed in 1783 were advanced from the 
royal treasury to " answer numerous urgent and indispensable expenses 
in the course of the year." The contract made between the King of 
France and the United States, on the 25th of February, contains thesfr 
words : " The Minister Plenipotentiary of the United States having 
represented to the King the exhausted state to which the Americans 
have been reduced by a long and disastrous war, His Majesty has taken 
into consideration the request of the American Minister, in the name 
of the Congress of the United States, for a new advance of money to- 
answer numerous urgent and indispensable expenses in the course of 
the present year, and notwithstanding the no less pressing necessities 
of his own service, has determined to grant to Congress a new pecuniary 
assistance, which he has fixed at the sum of six million livres tournois,. 
under the title of loan under the guarantee of the whole thirteen United 
States." — See Journal of Congress for 1783. 



46 The Revolutionary Finances, 

French government assisted the United States to the 
extent of 43,000,000 livres; 9,000,000 in the way of 
subsidy, 24,000,000 by loans, and 10,000,000 by 
guaranty — total, $7,962,962. The French loans car- 
ried interest at the rate of five per cent, per annum ; 
the Dutch loan four per cent. ; as to that on the 
French loans, " His Majesty being willing to give to 
the United States a new proof of his ajffection and 
friendship, makes a present of and forgives the whole 
arrears of interest to the day of the treaty of peace, a 
favour which the Minister of the Congress of the 
United States acknowledges to flow from the pure 
bounty of the King." ^ 

^ See the third article in the contract between the United States and 
France, completed at Versailles July 16th 1782. 



The Revolutionary Finances, 47 



YIII. 

On the 6th of February 1778 Louis XYI. en- 
tered into treaties of amity and commerce and of 
alUance with the United States, on a footing of the 
most perfect equality and reciprocity. By the latter 
of these the French King became the guarantee of 
their sovereignty, independence and commerce. The 
Marquis de Lafayette was among the first in the 
American army who received the welcome tidings. 
In a transport of joy he embraced General Washing- 
ton, exclaiming — " The King, my master, has ac- 
knowledged your independence, and entered into an 
alliance with you for its establishment." The joy 
felt b}^ the people and the army exceeds description. 
The several brigades assembled by order of the 
Commander-in-Chief, and ofiered public thanks to 
Almighty God. '' Long live the King of France !" 
burst from the breast of every private in the army. 
The Americans fancied that peace was within view. 
But Congress was wiser, and that the people might 
not be lulled into a dangerous confidence warned 
them : " You must yet expect a severe conflict ; though 
a foreign alliance may secure our independence, it 
cannot save our country from devastation." ^ 

And so the event proved. 

^ Ramsay. 



The Revolutionary Finances. 



IX. 

Unfortunately the tax recommended to the states 
in November 1777 failed, and the sums derived 
from loans were greatly inadequate to the expendi- 
tures for the support of the war; and although the 
affairs of the states had experienced a favourable turn 
in 1778, the depreciation of the notes, under the 
unavoidable necessity of largely increased issues, grew 
rapidly greater. The emissions authorized during the 
year aggregated sixty-three million five hundred 
thousand dollars ; the whole sum of bills emitted up 
to the 1st of January 1779 being one hundred and one 
million five hundred thousand. The solid cash pass- 
ing through the continental treasury during the year 
was only seventy-eight thousand six hundred and 
sixty-six dollars, and in 1779 but seventy-three thou- 
sand dollars — so that the whole machinery of govern- 
ment was carried on for two entire years, so far as the 
agency of coin was concerned, with one hundred and 
fifty -one thousand six hundred and sixty-six dollars !/ 
So small an expenditure of metallic currency shows 
the powerful agency of paper in the war operations of 
that critical period, performing as it did, in spite of 
counterfeits and depreciation, the office of hard money.* 

^ Breck. — " This handful of coin in gold would weigh but seven 
hundred pounds ; and we may not be surprised at the government being 
ao chary as to refuse General Washington's demand for a small share 



The Revolutionary Finances. 49 

2. According to Thomas Jefferson's table the cash 
value of the emissions authorized in 1778 was some- 
-what more than eleven million three hundred and 
thirty thousand dollars. The depreciation in January 
and February was four paper dollars for one in silver ; 
in March five for one ; in April six for one ; in May 
five for one ; in June and July four for one ; in Au- 
gust and September five for one ; in November and 
December six for one.^ The rise in value in June and 
July was due to intelligence of the French alliance. 

3. The year was but a repetition of the financial 
difficulties and embarrassments of 1777. ^^Let those 
among you who have leisure and opportunity," said 
€ongress, in an address to the public in May, '' collect 
the^ moneys which individuals in your neighbourhood 
are desirous of placing in the public funds. Let the 
several legislatures sink their respective issues, that so 
there being but one kind of bills there may be less 
danger of counterfeits. Refrain a little while from 
purchasing those things that are not absolutely neces- 
sary, so that they who have engrossed commodities 
may suffer (as they deservedly will) the loss of their 
ill-gotten hoards." Later, in the last days of Decem- 
ber, it was considered important officially to deny re- 
ports " circulated in divers parts," that " Congress 
would not redeem the bills issued by them to defray 
the expenses of the war, but would suffer them to sink 

of it to pay bounties to enlisted soldiers. In denying him Congrfss 
declared that the coin must be kept for the commissaries of prisoners, 
to be used where paper would not pass." 

^ It is to be observed that the depreciation was greater in some states 
than in others at the same moment. 



50 The Revohitionary Finances. 

in the hands of the holders." Such allegations were- 
denounced as false and derogatory to their honour. 
And doubtless at that time the confident belief was 
that ttie bills would be paid to the uttermost. 



Tlte Revolutionary Finances. 61 



X. 

r 

Notwithstanding, however, the great helps receiv- 
ed from France of men, ships and money, and the 
widespread hopes which the alliance with that great 
empire had excited, the financial circumstances of both 
Congress and the states were daily growing more em- 
barrassing and gloomy. With a view to radical im- 
provement in the public credit, Congress signalized the 
opening of the year 1779 with measures of substantial 
importance. On the 2d of January — besides calling 
out of circulation the bills authorized the 20th of May 
1777 and the 11th of April 1778,^ both of which emis- 
sions had been so extensively counterfeited as practi- 

^ That great source of moral turpitude, the circulating paper, died of 
itself without any visible wound, except from the immense quantity 
counterfeited in New York and elsewhere under British influence. In 
a confidential letter to Lord George Germaine, about this time (1781), 
General Clinton observed, '' that the experiments suggested by your 
lordships have been tried ; no assistance that could be drawn from the 
power of gold or the arts of counterfeiting have been left untried, but 
still the currency, like the widow's cruise of oil, has not failed." — 
[Gordon's History of the American Revolution.] " It is a fact too well 
authenticated to admit- of dispute," says Henry Phillips, Jr., "that 
General Howe aided the making and altering of counterfeit continental 
bills. In the same newspaper — in New York — in which the British 
oflBcial documents were printed, were also printed advertisements pro- 
posing to supply counterfeit money to persons going into other colonies ; 
so nearly and exactly executed that no risk attended their circulation. 
Persons accompanying a British flag of truce were known to have made 
use of the opportunity for circulating the counterfeits; and emissaries 
from New York endeavoured to obtain from the mills paper similar to 
that used by Congress for its emissions."— [Phillips's Continental 
Mo7iey, ii. 70.] 



52 The Revolutionary Finances, 

Cally to destroy their value — Congress appealed to the 
states to pay into the continental treasury their respect- 
ive quotas of fifteen millions of dollars for the year 
1779, and six millions a year for eighteen years from 
and after 1779; the whole sums so paid to be a fund 
for sinking the loans and emissions made prior to the 
31st of December following./ So much of it as was 
derived from the yearly payments of six millions was 
to be devoted in the first instance to the payment of 
interest on loans made and to be made up to the 1st 
of January 1780, and secondly, to the redemption of 
the principal of loans contracted up to the same date. 
The residue, together with the amount derived from 
the fifteen millions to be paid during the year 1779, 
was not to be* reissued but destroyed. And finally, 
the bills issued by Congress prior to 1780 were alone 
to be received on account of the quotas. Three days 
later taxes to the amount of fifteen millions were al- 
lotted among the states ; Georgia was exempted from 
the apportionment, that state being occupied by British 
troops. — On the 21st of May, in consequence of the 
extreme depreciation of the paper, in addition to the 
fifteen millions asked for in January, the states were 
called upon to supply, for the service of the year 1779, 
their several quotas of forty-five millions — the whole 
to be paid into the continental treasury before the 1st 
of January 1780. On the 6th of October, Congress, 
accommodating itself to the depreciation as it then 
stood, and still hoping that the taxes already called 
for — if duly collected — would stop it where it was, 
and answer the demands on the public till February 
following, called on the states to pay into the treasury 



I 



The Revolutionary Finances, 53 

on the first of that month, and on the first day of 
each succeeding month to the 1st of October 1780, in- 
clusive, their respective quotas of the further sum of 
fifteen miUions of dollars. 

Each of these calls was accompanied by circular 
letters addressed to the states. " Suddenly called 
upon," said the first of these, " to repel the unpro- 
voked invasion of a prince who ought to have exerted^ 
himself for our protection ; without arms or ammuni- 
tion, without military discipline or permanent finances^, 
without an established government and without allies', 
and enfeebled by habitual attachments to our very 
enemies, we were precipitated into all the expensive 
operations relative to a state of war with one of the 
most formidable nations on earth. Surrounded on all 
sides with wants, difficulties and dangers, notwithstand- 
ing the internal wealth of our country, immediate taxa- 
tion was impracticable. And for the same reason, and 
a share of ill success at different periods, we could not 
hope, either at home or abroad, to borrow money to 
supply our exigencies. From necessity we embraced 
the expedient of emitting paper money on the faith, 
of the United States ; an expedient often successfully- 
practised in separate states while we were subjected ta 
British dominion. 'Large sums were indispensably ne- 
cessary, and the paper currency multiplied beyond 
what was necessary for the purposes of a circulating 
medium. This alone could not fail to discredit it in 
some degree, but the arts of an unprincipled enemy 
have added to the mischief. As their last effort, they 
have had recourse to fraud. Their emissaries have 
employed a variety of artifices to debase our money 



54 The Revolutionary Finances. 

and increase the prices of commodities^ The fears 
and apprehensions of the people have been alarmed 
by misrepresentations, while our enemies of the high- 
est rank have not hesitated to counterfeit our bills of 
credit and disperse them through the country. Such 
being the embarrassments which interrupt the free 
circulation of our money, they loudly call for a remedy, 
and Congress, from a regard for good faith, for private 
justice and the public safety, are bound to apply it. 
/To raise the value of our paper money and to redeem 
it will not, we are persuaded, be difficult. Without 
public inconvenience or private distress, the whole of 
the debt incurred in paper emissions to this day may 
be cancelled by taxes ; it may be cancelled within a 
period so limited as must leave the possessor of the 
bills satisfied with his security, and if, by a continu- 
ance of the war, the public service should demand 
further emissions, they, too, may be cancelled within 
the same period; it being evident that our ability to 
sustain a tax must increase in proportion to the quan- 
tity of money in circulation.J '' The great and in- 
creasing depreciation of your currency," said the second 
of these addresses, issued in May, " requires the imme- 
diate, strenuous and united efforts of all true friends 
of the country. In vain will it be for your delegates 
to form plans of economy, to strive to stop continued 
emissions by loans or taxation, if you do not zealously 
co-operate with them in promoting their designs, and 
use your utmost industry to prevent waste of money 
in expenditure, which your respective situations in the 
places where it is expended may enable you to do. A 
-discharge of this duty and a compliance with recom- 



The Revolutionari/ Finances, 55 

mendations for supplying money, may enable Congress 
to give speedy assurances that no more emissions shall 
take place, and thereby end that source of deprecia- 
tion. We are persuaded you will take all possible 
care that the public welfare interfere as little as may 
be with the comfort and ease of individuals; and 
though raising these sums will press heavily on some 
of your constituents, yet the obligations we feel for 
your venerable clergy, the truly helpless widows and 
orphans, your most gallant, generous and meritorious 
officers and soldiers, and the public faith and common 
weal, so irresistibly urge us to attempt the apprecia- 
tion of your currency that we cannot withhold obedi- 
ence to those authoritative sensations. To our con- 
stituents we submit the propriety and purity of our 
intentions, well knowing they will not forget that we 
lay no burden upon them but those in which we par- 
ticipate with them ; a happy sympathy that pervades 
society formed on the basis of equal liberty. Many 
cares, many labours — and may we not add reproaches ? 
— are peculiar to us. These are the emoluments of our 
unsolicited stations, and with these we are content if 
jou approve our conduct." 'In the brief letter of the 
9th of October Congress said : " The money which 
Congress is at liberty to emit (the limit of emissions 
had been fixed on the 1st of September, preceding at 
$200,000,000, of which a considerable amount was as 
jet unauthorized), will probably be expended in the 
beginning of December next, and subsequent supplies 
must be furnished by the states. This evinces the 
necessity of punctual payment of the respective quotas, 
on which their public credit, the existence of their 



« 



56 The Revolutionary Finances, 



y 



arms and the support of their liberties so greatly de- 
pend. We are deeply concerned to find the sums 
required are so large, but since the emissions are lim~ 
ited we doubt not that the operations of the taxes and 
other salutary measures in the course of the year will 
reduce prices, and enable Congress to lessen the quotas, 
or apply a part of them to diminish the public debt. 
To promote so desirable an object we, on our part, 
will endeavour to observe the strictest economy in the 
public expenditures." 

Unhappily the states did not respond to these ap- 
peals ill any adequate degree^ 

2. " A compliance with these requisitions," said a 
committee of Congress in April 1781, "would not 
only have answered the exigencies of the year (that 
is, the year 17^), but would have arrested deprecia^ 
tion in its progress. But as they were not complied 
with in due time, and the demands of the public were 
pressing and constant, the prospect of future taxes 
served only to urge those who had in their possession 
the supplies and accessaries wanted to enhance the 
price in order to pay their taxes with greater ease, 
while the treasury, receiving no recruit from taxes, 
was from time to time replenished with new emissions 
— and from these causes combined, the depreciation, 
instead of receiving a check, proceeded with redoubled 
vigour." 

The emissions authorized between the 1st of January 
and the 1st of September 1779 aggregated one hun- 
dred millions of dollars, and from the 1st of September 
to the 29th of November, when the last emission was 
authorized, the aggregate sum of emissions was forty 



Tlie Revolutionary Finances, 57 

millions — making a total for the year of one hundred 
and forty millions; and from the first emission in June 
1775 to September 1st 1779- of one hundred and sixty 
millions ($159,948,880) ; the coin value of the emissions 
of 1779 ($140,052,280) being, according to Thomas 
Jefferson's table, seven millions three hundred and 
twenty-nine thousand two hundred and seventy-eight 
dollars. The depreciation, according to the same 
authority, \vas — January 14th, eight for one ; February 
3d and 12th, ten for one ; April 2d, seventeen for one ; 
May 5th, twenty-four for one; June 4th and 17th, 
twenty for one; September 17th, twenty-four for one; 
October 14th, thirty for one; November 17th and 
29th, thirty-eight and a half for one. 

3. As there was a general outcry because of the 
depreciation and the Hoods of money in circulation. 
Congress resolved on the 1st of September that they 
would on no account whatever emit more bills than 
enough to make the whole amount up to two hundred 
millions. Forty million fifty-one thousand one hun- 
dred and tw^enty dollars being the sum necessary to 
conclude the two hundred millions, it was determined 
that only so much thereof be emitted as should be 
absolutely necessary for the public exigencies before 
adequate supplies could be otherwise obtained, relying 
for such supplies on the exertions of the states.^ 

4. On the 13th of September Congress issued an 
elaborate address, exhaustive of the condition of the 
financial affairs of the country. Money, said the 
authors of this important paper, was necessary to 

* Report of Committee of Congress, 18th April 1781. 



58 The Revolutionary Finances. 

create^ pay and supply the army. " Of your own, 
there was at the beginning of the war but little ; of no 
nation in the world could you then borrow." Bills of 
credit were emitted of necessity, and the faith of the 
people was pledged for their payment, and loans were 
solicited and obtained. A national debt was unavoid- 
ably created. The sum of the debt on which interest 
was payable in France was $7,545,196; on which 
interest was payable in America $26,188,909 ; the 
amount borrowed abroad was not exactly known, the 
balances not having been transmitted, but was sup- 
posed to be about $4,000,000. The aggregate taxes 
paid into the continental treasury were stated at 
$3,027,560; so that all the funds advanced by the 
people in the form of loans and taxes w^ere but 
$36,761,665. '^ Judge then of the necessity of emis- 
sions, and learn from whom and whence that necessity 
arose." r' We unanimously declare it essential to the 
welfare of the states that the taxes already called for 
be immediately paid into the treasury." " Exclusive of 
the great expenses of the war, the depreciation of the 
currency has swelled the price of every necessary 
article, and of consequence has made such additions 
to the usual amount of expenditure that very consid- 
erable supplies must be immediately provided by 
taxes and, loans." The physical ability of the States 
to pay its debts was elaborately argued, while the 
excellence of the circulation provided by Congress was 
alleged in a well-known phrase : " Let it be remem- 
bered that paper money is the only kind of money 
which cannot ' make wings unto itself and fly away.' 
It remains with us; it will not forsake us; it is ever 



The Revolutionary Fmances. 59 

ready and at hand for the purposes of commerce or 
taxes, and every industrious man can find it." It liad 
been charged by the enemies of America that there 
was reason to apprehend a violation of the pubhc 
faith. This imputation was indignantly repelled. '' It 
is with great regret and reluctance," said the authors 
of the paper from which we are quoting, " that we can 
prevail on ourselves to take the least notice of a ques- 
tion which involves in it a doubt so injurious to the 
honour and dignity of America." ^^ We should pay 
an ill compliment to the understanding and honour 
of every true American were we to adduce many 
arguments to show the baseness or bad policy of vio- 
lating our national faith, or omitting to pursue the 
measures necessary to preserve it. A bankrupt faith- 
less republic would be a novelty in the political world, 
and appear among reputable nations like a common 
prostitute among chaste and respectable matrons. The 
pnde of America revolts from the idea : her citizens 
know for what purposes these emissions were made, 
and have repeatedly plighted their faith for the 
redemption of them ; they are to be found in every 
man's possession, and every man is interested in their 
being redeemed : they must therefore entertain a 
high opinion of American credulity, who suppose the 
people capable of believing, on due reflection, that all 
America will, against the faith, the honour and the 
interest of all America, be ever prevailed upon to 
countenance, support or permit, so ruinous, so dis- 
graceful a measure. .... Determine to finish the 
contest as you began it, honestly and gloriously. Let 
it never be said that America had no sooner become 



60 



The Revolutionary Finances. 



^ 



independent, than she became insolvent ; or that her 
infant glories and growing fame were obscured and 
tarnished by broken contracts and violated faith, in 
the very hour when all the nations of the earth were 
admiring, and almost adoring, the splendour of her 
rising." ^ / \ 




The Revolutionary Finances, 61 



XI. 



The campaign of the year had been barren of 
important results. On the part of the British it had 
been predatory ; one of robbery, burning and destruc- 
tion ; on the part of the Americans defensive, although 
the actions at Stony Point and Powles Hook were 
notable instances of their enterprise and valour. 
Georgia, however, was substantially recovered to the 
Crown ; and the British, seeing in the condition and 
circumstances of the Southern States opportunity for 
successful operations, made vigorous preparations for 
a winter and spring campaign in that portion of> the 
country. The means of defence were inconsiderable ; 
and Congress, deeply impressed with the importance 
of impending events — not only in the South but in the 
North also — exerted all its powers to provide for the 
crisis. The condition of the treasury was one of 
anxious solicitude: ' Empty, and greatly in arrears, 
taxes and loans utterly inadequate, prevented from 
further emissions of paper money by a solemn pledge 
to the people,^ the army unpaid, the ^subsistence de- 

\ " The situation of the army with respect to supplies is beyond descrip- 
tion alarming. It has been five or six weeks past on half allowance, 
and we have not more than three days' bread at a third allowance on 
hand, nor anywhere within reach. When this is exhausted we must 
depend on the precarious gleanings of the neighbouring country. Our 
magazines are absolutely empty everywhere, and our commissaries 
entirely destitute of money or credit to replenish them. We have never 



62 The Revolutionary Finances, 

partment unsupplied, — a new mode of requisition was 
now adopted by the Congress. On the 25th of Feb- 
ruary the states were called upon to furnish, for the 
campaign of 1780, supplies in kind, to be raised and 
delivered at such times and places as the commander- 
in-chief of the army should fix upon as most conve- 
nienty The call was for 330,000 hundred weight of 
beef; 455,000 gallons of rum; 123,000 barrels of 
flour; 695,000 bushels of corn or other short forage 
equivalent ; 53,000 bushels of salt ; 9000 tons of hay ; 
7000 hogsheads of tobacco, and 52,000 bushels of rice. 
/The accounts of the states for these supplies were to 
be kept and settled in Spanish milled dollars, and the 
balances ultimately paid in specie ; and if, upon final 
adjustment, any state was found to have supplied more 
than its quota under the call, the value of the surplus 
was to be paid for in specie, and interest allowed at 
the rate of six per cent, a year; while, if any state 
failed in delivering its quota, it was to be charged with 
the aggregate sum of the deficiency, and pay to the 
United States a like interest thereon. None of the 
states complied with this call, nor did anything ap- 
proximating to a compliance^ Later in the year, on 

experienced a like extremity at any period of the war. We have often 
felt temporary want from accidental delays in forwarding supplies, but 
we always had something in our magazines and the means of procuring 
more. Neither one nor the other is at present the case. This repre- 
sentation is the result of a minute examination of our resources." — 
[Washington to President Reed, December 16th 1779.] " Our provi- 
sions are in a manner gone. We have not a ton of hay at command, 
nor magazines to draw from. * * Money is extremely scarce, and worth 
little when we get it. We have been so poor for a fortnight that we 
could not forward the public despatches for want of cash to support the 
expresses." — [General Greene to President Reed, February 29th 1780.] 



The Revohdionary Finances. 63 

the 4th of November, a similar requisition was made 
for taxes amounting to ten millions of dollars in gold 
or silver, or " money of the new emission," — or specific 
articles enumerated in the call and to be supplied at 
fixed prices, and upon terms the same as those which 
accompanied the call of the 25th of February. In 
the interim between these two dates, several appeals 
were made to particular states; September 15th no- 
tably, when Massachusetts, New Hampshire and Con- 
necticut were asked, for the '-immediate supply of 
the army," to furnish one thousand head of cattle 
weekly ; and New Jersey, Pennsylvania and Delaware 
were urged " with all possible despatch" to supply two 
thousand head for instant wants. It illustrates the 
extreme poverty of Congress during this important 
year, that it was compelled to draw warrants to the 
amount of $28,300, on the loan-offices, for means ne- 
cessary to defray the expenses of forwarding the cattle 
to the army. 



64 The Revolutionary Finances, 



XII. 

The depreciation of the bills was now (March 
18th 1780) so excessive, and the disorders it oc- 
casioned so wide-spread and important, that Congress 
resolved upon a vital modification of their character^ 
"These United States having been driven into this 
just and necessary war at a time when no regular 
civil governments were established of sufficient energy 
to enforce the collection of taxes, or to furnish funds 
for the redemption of such bills of credit as their ne- 
cessities obliged them to issue, and before the powers 
of Europe were sufficiently convinced of the justice of 
their cause, or of the probable event of the contro- 
versy, to afford them aid or credit ; in consequence of 
which their bills increased in quantity beyond the sum 
necessary for the purposes of a circulating medium, — 
and wanting at the same time specific funds upon 
which to rest for their redemption, they have seen 
them daily sink in value, notwithstanding every 
effort that has been made to support them; insomuch 
that they are now passed, by common consent in 
most parts of the United States, at at least thirty-nine 
fortieths below their nominal value, and still depre- 
ciating, — whereby the community suffers great injus- 
tice, the public finances are deranged, and the necessary 
dispositions for the defence of the country are impeded 
and perplexed ; to remedy these evils, for which pur- 



The Revolutionary Finances. 65 

pose the United States are now become competent, — 
their independence being well assured, their civil gov- 
ernments established and vigorous, and the spirit of 
their citizens ardent for exertion, — it is essential 
speedily to reduce the quantity of the paper medium 
in circulation, and to establish and appropriate funds 
that shall insure the punctual redemption of the bills," 
Congress resolved, that the respective states should 
continue to bring into the continental treasury, by 
taxes or otherwise, their full quotas of the fifteen mil- 
lions of dollars assigned among them on the 6th of 
October 1779 ; that silver and gold should be received 
in payment of the taxes at the rate of one Spanish 
milled dollar in lieu of forty dollars of the bills ; that 
the bills so brought in (except those for January and 
February, which were required to discharge past con- 
tracts), should not be reissued but destroyed ; that as 
rapidly as such bills were brought in and funds should 
be provided, other bills should be issued, not to ex- 
ceed on any account a twentieth part of the nominal 
sum of the bills brought in to be destroyed ; that the 
new bills to be issued should be redeemable in specie 
after six years, with interest at five per cent., also to 
be paid in specie at the time of redemption, or at the 
election of the holder annually in sterling bills of ex- 
change drawn upon the American commissioners in 
Europe at 45. 6c?. sterling per dollar. The new bills 
were to be issued on the funds of the individual states, 
to be established by them for the purpose of redemp- 
tion, and the faith of the United States was also 
pledged as an additional security, in case any state 
should be rendered incapable to redeem them. The 



66 The Remlutionary Finances, 

new bills were to be issued by the continental trea- 
sury, and six-tenths of them were to be delivered to 
the states in their proper proportions; four-tenths to 
be for the use of the United States, and credited to 
the states in adjustment of their quotas under the call 
of 6th of October 1779 ; the states to be charged with 
whatever portion of the interest was paid by the 
United States in bills of exchange ; and finally, they 
were called on to provide funds for their several 
quotas of the new bills, to be so productive as to sink 
or redeem one-sixth part of them annually after the 
first of the ensuing January (1781)_^ 

It is not worth while to dwell upon this act ; it was 
denounced by Doctor Witherspoon as a "great and 
deliberate breach of the public faith;" the Count de 
Vergennes said it was "an act of bankruptcy," and 
other public men were equally bitter in their expres- 
sions concerning it. The reader can judge for him- 
self — in view of all the circumstances — how far the 
Congress was censurable, or whether it was so at all 
or not. 

The statesmen of Congress offered this scheme to 
the states in the confident hope and belief that it would 
be accepted with punctuality; that it would restore 
the currency to a fixed standard ; that it would enable 
the states to furnish the supplies called for on the 25th 
of February ; and that it would put Congress in a po- 
sition to pay the army, discharge the more pressing 
debts already contracted, and provide means for the 
exigencies of the campaign. But the states did not 
respond^/ as Congress so strongly hoped ; and Vpublic 
necessities again compelled the adoption of temporary 



The Revolutionary Finances, 67 

expedients. Among these was that of raising funds 
by drawing bills of exchange on the American minis- 
ters in Europe ; although, as was afterwards with ex- 
treme simplicity admitted. Congress had not sufficient 
assurance that the bills would be honoured./ The 
whole amount of these foreign bills authorized to be 
drawn, including those intended to pay interest on the 
public debt, approximated to near three-quarters of a 
million of dollars. 

On the 20th of March the states were recommended 
to so modify their tender laws as to conform them to 
the existing state of the currency, and to take care so 
to frame them as to prevent unjust advantage being 
taken of the proposed action of the legislatures. The 
states complied, though it is hardly necessary to re- 
mark that it was impossible to prevent fraud and 
injustice, however vigilant the assemblies were to 
attempt it. /^ ^ 



68 The Revolutionary Finances. 



XIII. 

On the 24th of April Congress made another ap- 
peal to the states : ^' It is the duty of Congress to be 
as full and explicit in their requisitions as the public 
exigencies are great and pressing ; and they are confi- 
dent that the citizens of the states are not more de- 
sirous to be informed of their affairs than they are 
ready to afford the most vigorous assistance. It is 
unnecessary to mention our embarrassments ; they are 
known to you; to the means of relieving them we 
wish to call your attention. The whole of the moneys 
due on the quotas of taxes to the 1st of March last 
are become of immediate and indispensable necessity. 
On these quotas drafts are now making and must con- 
tinue to be made to the whole amount, nor can a 
doubt be admitted of their being punctually answered. 
If any state be unprepared, if the collections are in- 
complete, not a moment is to be lost. Delay may 
involve consequences too fatal to be hazarded. Urge, 
therefore, the instant execution of every measure which 
has been adopted, and the speedy adoption of such as 
yet remain to be taken. The crisis calls for exertion. 
Much is to be done in a little time, and every motive 
that can stimulate the mind of man presents itself to 
view. No period has occurred in this long and glori- 
ous struggle in which indecision could be so destructr 



The Revolutionary Finances, 69 

ive; and on the other hand no conjuncture has been 
more favourable to great and deciding efforts." 

2. On the 19 th of May Congress called upon the 
states from New Hampshire to Virginia — those two 
states included — to collect and pay into the public 
treasury, within thirty days, ten millions of dollars in 
continental currency, part of the sum required to be 
paid last year. The states, in order to comply, pressed 
the collection of the taxes, which occasioned so much 
clamour on the part of those who had furnished sup- 
plies on credit, that on the 27th of May the legisla- 
tures were recommended to empower the collectors of 
continental taxes due before the 1st of March 1780, 
to receive in payment of them the notes or certificates 
which had been given by the quartermaster and com- 
missary of purchases for supplies. 



70 The Revolutionary Finances, 



XIY. 



During this year [1780] Congress directed its 
efforts to the reforming of abuses, and a more respon- 
sible administration of the army funds and supplies. 
In every department there had been peculation and 
wastefulness. There was a good deal of complaint at 
a very early period touching these things, to which no 
special heed had been given ; at any rate not in any 
effective official way; but at length, in May 1779, the 
matter came before Congress. The Board of Treasury, 
on the 28th of that month, reported that in the judg- 
ment of its members it would be impracticable to 
carry on the war with paper money at the existing 
enormous expenditures made by the departments of 
the commissary and quartermaster generals, and of 
the medical director. The Board said that an opinion 
generally prevailed among the people that one cause 
of the alarming cost of those departments arose from 
allowing commissions to the numerous persons em- 
ployed in purchasing for the army, and that there was 
a wide dissatisfaction in consequence. A committee 
was appointed to inquire into and report upon the 
subject. On the 9th of July the committee reported,, 
recommending to the executive powers of the states^ 
instantly to make strict inquiry into the conduct of 
every person within their several jurisdictions era- 
ployed in any of the departments charged, and to 



The Revohdionary Fmcmces. 71 

suspend and cause the prosecution of those guilty or 
strongly suspected. Later, in August 1780, Congress 
declared that it was of the utmost importance to 
prevent waste, destruction, embezzlement and misap- 
plication of the public stores; and as no adequate 
means had been provided for the just punishment of 
delinquents in the various military departments, it 
was resolved [it is to be observed that the resolves of 
Congress were substantially acts of Congress, intended 
to have the effect and force of laws so far as they 
went] that any one who should sell, embezzle or wil- 
fully misapply the military or hospital stores, horses, 
arms or ammunition, should suffer death, or such other 
punishment as a court-martial should deem equal to 
the punishment of the offender. 

2. " In addition to short crops (speaking of the 
years 1779 and 1780) and depreciating money, dis- 
order and confusion pervaded the departments for 
supplying the army. Systems for these purposes had 
been hastily adopted, and were very inadequate to the 
ends proposed. To provide for an army under the 
best establishment and with a full military chest is a 
work of difficulty, and, though guarded by the precau- 
tions which time and experience have suggested, opens 
a door to many frauds ; but it was the hard case of the 
Americans to be called on to discharge this duty with- 
out knowledge of the business, and under ill-digested 
systems and with a paper currency never two days of 
the same value. Abuses crept in, frauds were prac- 
tised, economy was exiled. To obviate these evils 
Congress adopted the expedient of sending a commit- 
tee to the camp of the main army. They were fur- 



72 The Revolutionary Finances, 

nished with ample powers and instructions to reform 
abuses, to alter preceding systems and to establish 
new ones in their room. The committee proceeded to 
camp in May 1780, and thence wrote sundry letters 
to Congress and the states, in which they confirmed 
the representations made of the distresses and dis- 
orders everywhere prevalent.^ In particular they 
stated — that the army was unpaid for five months; 
that it seldom had more than six days' provisions in 
advance, and was on several occasions for successive 
days without meat ; that the army was destitute of 
forage ; that the medical department had neither sugar, 
coffee, tea, chocolate, wine nor spirituous liquors of 
any kind ; that every department of the army was 
without money, and had not even the shadow of credit 
left; that the patience of the soldiers, borne down by 
the pressure of complicated sufferings, was on the 
point of being exhausted." ^ 

^ President Reed, in his message to the Assembly of Pennsylvania in 
1779, says : '' In conformity to the laws of the state and your desire, we 
have proceeded to the sale of the confiscated estates, and have the satis- 
faction to acquaint you that the sums arising therefrom are so consider- 
able as to afford a great relief to the good people of this state from their 
public burdens." 

2 Ramsay, ii. 189. 



The Revolutionary Finances, 73 



XV. 



Now, here are some facts concerning the constitu- 
tion of the army : The first enlistments into the conti- 
nental service expired at the end of the year 1775. The 
commander-in-chief, not being able to re-enlist the sol- 
diers, was reduced almost to the necessity of abandoning 
the extensive lines in the vicinity of Boston ; but not- 
withstanding this, such were the prejudices in favour 
of short enlistments, and such the dread of a standing 
army, that Congress was obliged to enlist the second 
army for one year, and the time of its service expired 
at or about the end of 1776. During that campaign 
Congress was so fully convinced of the fatal conse- 
quences of such a policy as at all events to determine 
that the next enlistments should be for the war; but 
was afterwards constrained to provide the alternative, 
"or for three years," — and those who enlisted for this 
term left the army in 1780. In 1780 the army was 
greatly reduced, and the states were earnestly called 
on to recruit their respective regiments, — but such 
were the prospects of gain from privateering and other 
employments — such had been the sufferings of the 
army, and so weakened was the confidence in public 
faith, as to require enormous bounties in specie for ob- 
taining recruits ; the average bounty in many states 
was two hundred and fifty dollars in specie, and in 
Massachusetts it was upwards of two hundred and 



74 The Revolutionary Finances. 

eighty. If we divide the army into four classes it will 
appear that the soldiers of the first and second classes 
were discharged and fully paid in 1775 and 1776 ; 
that the soldiers of the third class, who enlisted for 
the war between 1777 and 1780, served six, %n^ or 
four years, without any other prospect of reward than 
the stipulations of Congress ; and that the fourth class, 
some of whom served two and a half years, others two 
years and others one, were amply paid by bounties, the 
least of which amounted to one hundred dollars a year, 
or eight and one-third dollars a month in specie, exclu- 
sive of the allowance made by Congress. The third 
and fourth classes were, however, entitled by their 
contract to six and two-third dollars in specie per 
month, or to an equivalent exclusive of bounties, ra- 
tions and clothing.^ 

2. Until the opening of the campaign of 1780 the 
army had borne its sufferings with unparalleled patience 
and perseverance. What pay they had received was 
chiefly depreciated money. But Congress was not un- 
mindful of their sufferings and services. As early as 
September 1776 it was resolved to make provision for 
granting lands in certain proportions to the officers 
and soldiers who would engage in the service and con- 
tinue therein to the close of the war or until discharged 
})y Congress, and to the representatives of such officers 
and soldiers as might be slain by the enemy. On the 
15th of May 1778 it was unanimously resolved that 
all military officers commissioned by Congress, who 
were then or who thereafter might be in the service 

^ Elbridge Gerry in House of Representatives, 18th February 1790: 
"Debates in Congress," ii. 1325-6. 



The Revolutionary Finances, 75 

of the United States and continue therein during the 
war, should, after the conclusion thereof, receive annu- 
ally for the term of seven years, if they lived so long, 
one-half of the pay then established for such officers, 
with a proviso that general officers should not receive 
more than the half-pay of a colonel ; and it was re- 
solved also that non-commissioned officers and soldiers 
enlisted for the war should receive at the expiration 
of it, a reward of eighty dollars. On the 17th of Au- 
gust 1779, having prefaced their resolution with a 
preamble setting forth that the army of the United 
States of America, by their patriotism, valour and 
perseverance in the defence of the rights and liberties 
of the country, were entitled to the gratitude as well 
as approbation of their fellow-citizens, they recom- 
mended to the several states to make such further 
provision for the officers and soldiers enlisted for the 
war as belonged to them respectively, and who should 
continue in service till the establishment of peace, as 
should be an adequate compensation for the many dan- 
gers, losses and hardships they had suffered in the course 
of the contest ; either by granting to their officers half- 
pay for life and proper rewards to their soldiers, or in 
such other way as might appear most expedient. And 
it was recommended also that the states should make 
provision for the widows of such of their officers and 
soldiers who had enlisted for the war, as had died or 
might die in the service, as would secure to them the 
sweets of that liberty for the attainment of which 
their husbands had laid down their lives. On the 
10th of April 1780, Congress resolved that so soon as 
the state of the public finances would admit, they would 



76 The Revolutionary Finances, 

make good to the line of the army and the indepen- 
dent corps, the deficiency of their original pay occa- 
sioned by the depreciation of the currency ; but none 
were to derive the benefit of this resolution except 
those who had engaged to serve for the war or for three 
years, and were then in service, or should thereafter 
engage to serve during the war. On the 13th of Au- 
gust 1780, Congress resolved that from and after the 
first of that month the army should receive their pay 
in the " new bills," and again recommended to such of 
the states as had not made compensation to their offi- 
cers and soldiers, agreeably to the resolution of Con- 
gress of the 17th August 1779, to do so as soon as 
possible. At the same time the provision for granting 
lands was extended to the general officers ; and on the 
24th the resolution of May 1778, granting half-pay 
for seven years to officers who should continue in ser- 
vice to the end of the war, was extended to the gene- 
rals and such as had died or should thereafter die in 
the service, to commence from the time of such officers* 
death ; or if there should be no widow, or in case of 
her intermarriage, that it should go to the orphan 
children of such marriage. But still the public trea- 
f?ury remained unsupplied ; the army continued with- 
out pay, and oftentimes were in great distress for want 
oi provisions.^ 

^ Report of Committee of Congress, 18th May 1781. 



The Revolutionary Finances. 77 



XVI. 

The distress which the Americans suffered from 
the diminished value of their currency, though felt in 
the year 1778, did not arrive at its highest pitch till 
the year 1780. Under the pressure of sufferings from 
this cause, the officers of the Jersey line addressed a 
memorial to their state legislature, setting forth, "that 
four months' pay of a private would not procure for 
his family a single bushel of wheat ; that the pay of a 
colonel would not purchase oats for his horse; that a 
common labourer or expressman received four times 
as much pay as an American officer." They urged 
that unless a speedy and ample remedy was provided 
a dissolution of their hne was inevitable, and con- 
cluded by saying that their pay should be made up in 
Mexican dollars or in something equivalent.' 

2. The original idea of a continental army, to be 
raised, paid, subsisted and regulated upon an equal 
and uniform principle, had been in a great measure 
exchanged for state establishments. This mischievous 
measure partly originated from necessity, for state 
credit was not quite so much depreciated as conti- 
nental ; Congress not possessing the means for support- 
ing the army, devolved the business on the component 
parts of the confederacy. Some states, from their 
internal ability and advantages, furnished their troops 

^ Ramsay, ii. 184. 



78 The Revolutionary Finances, 

not only with clothing but with many conveniences. 
Others supplied theirs with some necessaries, but on a 
more contracted scale. A few, from their particular 
situation, could do little or nothing at all/ 

3. So great were the necessities of the American 
army, that Washington was obliged to call on the 
magistrates of the adjacent counties for specific quan- 
tities of provisions, to be supplied in a given number 
of days. At other times he was compelled to send 
out detachments of his troops to take provisions at 
the point of the bayonet.^ 

4. TBut though a tide of misfortunes appeared to 
be pouring in upon the United States, no signs were 
discovered of any disposition to relinquish the strug- 
gle. " They seemed to rise in the midst of their 
distresses, and to gain strength from the pressure of 
calamities." When Congress could command neither 
money nor credit, the citizens of Philadelphia formed 
a bank — called the "- Bank of Pennsylvania" — the sole 
object of which was to furnish the army with a large 
supply of rations. This institution was the project 
of Robert Morris, who, in conjunction with others, 
his fellow-citizens, subscribed altogether 315,000Z. 
Pennsylvania money. The subscribers to the bank 
pledged themselves to pay their subscriptions in gold 
and silver, if it became necessary in order to fulfil its 
engagements, while Congress, to indemnify and reim- 
burse them, directed the Board of Treasury to deposit 
in the bank 150,000/. sterling bills of exchange. The 
usefulness of this institution was great, and it was all 
the greater because the times were out of joint and 

^ Ramsay, ii. 185, ''^ Ramsay, ii. 186. 



The Revolidionary Finances. 79 

critical. The " Bank of Pennsylvania" continued its 
operations for about a year, and was the ground-work 
of the '' Bank of America," established in ITSL/ 

5. The powers of the committee of Congress in the 
camp of the General-in-Chief were so enlarged as to 
authorize them to frame and execute plans for draw^ 
ing out the resources of the country. In this character 
they urged the states to prompt and vigorous exer- 
tions ; but though the legislatures enacted laws and 
undertook their execution, they were only measurably 
successful. Touching this want of success in meeting 
the public exigencies, Ramsay philosophizes thus : 
^' The result of the experiment was, that however 
favourable republics may be to the liberty and happi- 
ness of the people in time of peace, they will be 
greatly deficient in that vigour and despatch which 
military operations require, unless they imitate the 
policy of monarchies by committing the executive 
department to a single will." Which is excellent good 
politics, but extremely unrepublican. 

6. 'Family gifts — the gifts of affection to soldiers 
in the army — entered not inconsiderably into the sum 
total of its support, w^hile the exertions of associated 
neidibours were also most useful./ The ladies of Phil- 

C 1 

adelphia — as an example of this — contributed of their 
means ; the widow gave her mite, and the rich, — well, 
the rich did not give in the proportion of Phillis the 
coloured woman who gave Is. Qd., but they did ex- 
tremely well, and on the 4th of July 1780, the wife 
of President Reed wrote to Washington that the 
-amount of their subscriptions was somewhat over 
three hundred thousand dollars ($300,634), and that 
6 

^1^^ 



80 The Revolutionary Finances, 

his orders were awaited as to the best plan of dispos- 
ing of the money. The Marchioness De Lafayette 
gave one hundred guineas in specie to this fund, and 
the Countess De Luzerne — another French lady of 
rank — gave six thousand continental dollars, equiva- 
lent to $150 in cash/ 

7. Notwithstanding all that was done, however, 
the army continued in distress and Congress in its em- 
barrassments. On the 26th of Ausust 1780, the states 
were earnestly recommended to take the most speedy 
and effectual measures for drawing in their respective 
quotas of the continental bills by taxes or otherwise, 
in order that the new money might be issued. And 
at the same time the states were further recommended 
to raise by taxes, payable in the new bills, their re- 
spective quotas of three millions of dollars, and to pay 
the same into the public treasury as speedily as pos- 
sible, the whole payment to be completed by the last 
day of December following. From this it was hoped 
that Congress would draw a supply of money to 
enable them to pay the army and carry on the war 
with vigour ; to discharge the unfunded debt, and pay 
the interest due on loan-office certificates. The con- 
sequences that ensued from the failure of the states tc 
comply with this call, though alarming and painful to 
recollect, were far short of what might have been 
apprehended.^ 

^ Life of President Joseph Reed, 26, et seq. 
. * Report of Committee of Congress, April 18th 1781. 



The Revohdionary Finances. ^1 



XVII. 

Now the consequences, so alarming and painful 
to the public recollection, are summed up in a word — 
mutiny. 

From a complication of wants and sufferings, a dis- 
position to revolt began to show itself in the army. 
It broke forth into full action among the soldiers 
stationed at Fort Schuyler. Thirty-one men of that 
garrison went off in a body ; being pursued, sixte'en 
of them were overtaken, and thirteen of the sixteen 
were instantly killed. About the same time two regi- 
ments of ^Connecticut troops mutinied and got under 
arms. They determined to return home or gain sub- 
sistence at the point of the bayonet. Their officers 
reasoned with them, and urged every argument that 
could interest either their pride or their passions. 
They were reminded of their good conduct and of the 
important objects for which they were contending, — 
their answer was, ^'Our sufferings are too great, and 
we want present relief." After much expostulation, 
they were at length prevailed upon to return to duty. 
It is remarkable that this mutinous disposition of the 
Connecticut troops was in a great measure quelled by 
the Pennsylvania line, which in the course of a few 
months planned and executed a much more serious 
revolt than that which they now suppressed. On the 
night of the 1st of January 1781, a mutiny broke out 



82 The Revolutionary Finances, 

among these. The whole line, except three regiments, 
mustered under arms and declared for a redress of 
grievances. They alleged that they had enlisted for 
three years or during the war ; the three years were 
expired, and the men insisted that the choice of stay- 
ing or going was in themselves. The officers con- 
tended that the choice was in the state. Superadded 
to this cause of dispute, were the real sufferings of the 
soldiers, — want of food, want of clothing, want of pay. 
The British tried to corrupt the mutineers ; but the 
mutineers were not traitors; they arrested the British 
spies ; delivered them into the hands of General 
Wayne, and they were tried, condemned and exe- 
cuted. The difficulties which lay at the bottom of 
this revolt were finally adjusted ; but the example was 
contagious. Some Jersey troops later in the month 
mutinied also ; they were less wise than the Pennsyl- 
vanians ; they proceeded to acts of outrage against 
particular officers, and professed obedience to others. 
The measures for reducing them to submission were 
prompt and energetic; two were executed, and the 
others were pardoned upon promise of future good 
behaviour.^ 

^ See Ramsay ii. 185, 219, et seq. 



The Revolutionary Finances, 8S 



XVIII. 

The depreciation of the bills proceeded during the 
year very steadily down to the point of seventy- 
five continental dollars for one in cash. In January 
the exchange stood at forty for one ; February, forty- 
seven for one; March and April, sixty for one ; May, 
fifty-nine for one ; June, sixty for one ; July, sixty- 
four for one ; August, seventy for one ; September and 
October, seventy-two for one; November, seventy-four, 
and in December, seventy-five for one. A famiUar 
instance of the effects of the depreciation was thus 
given by a writer in The Pennsylvania Packet : " I 
had money enough to buy a hogshead of sugar. I 
sold it again, and got a good deal more money than it 
cost me; yet what I sold it for, when I went to 
market again, would buy but a tierce. I sold that too 
for a great deal of profit, yet the whole of what I sold 
it for would afterwards buy but a barrel. I have now 
more money than I ever had, and yet I am not so rich 
as when I had less. I am sure we shall grow poorer 
and poorer unless we fall on some method to lower 
prices, and then the money we have to spare will be 
worth something." 

2. The depreciation of 1780 was partly due to the 
want of decisive results in the war operations, and 
partly to continued emissions by the states. As an 
extreme example of this latter, Virginia authorized 



84 The Revolutionary Finances. 

emissions to an aggregate of thirty millions during the 
year, and made it a legal tender at forty for one ! 
Other states did the same thing though less exten- 
sively ; so that the steady increase in the volume of 
the currency steadily depressed its nominal value. 

3. And it is a curious illustration of the laws which 
govern paper money, that as excessive issues had 
exiled the cash of the country from its accustomed 
place in the business of the people, it began to flow 
back as the paper money approached the period of its 
mortality. As this daily less capably performed the 
office of the instrument of exchange, gold and silver 
more certainly and amply flowed in to supply its place. 

4. If all the taxes called for by Congress during the 
year had been paid into the treasury, they would have 
aggregated one hundred and eighty-six millions of 
dollars ' 



The Revolutionary Finances, 85 



XIX. 

c 

The exhausted state of the continental treasury 
and the universal disorder of the finances, the pressing 
demands for suppHes in every department of the public 
service, the consequences which began to appear, and 
the confusion that threatened,, became very serious 
and alarming at the beginning of the year 1781, and 
the public necessities had arisen to such a pitch of 
urgency as convinced all thinking men that a speedy 
remedy or ruin was in waiting^V 

2. Though the revolts recited in a preceding para- 
graph had alarmed the states, they did not result in 
measures of permanent relief. The wants of the army 
were only partially supplied, and this chiefly by the 
exercise of military force, generally by seizing provi- 
sions and paying for them with a certificate which — 
as required by Congress — contained a statement on its 
face of the quantity and quality and price of what had 
been taken. But this sort of thing could not last; 
though in defiance of clamour Congress, impelled by 
the extremity of want, seriously thought of empower- 
ing the General-inChief to seize all the provisions he 
could find within twenty miles of his camp ! During 
the whole winter and spring the army suffered untold 
privations, — without food, without clothing, often 

^ Pelatiah Webster. 



86 The Revolutionary Finances, 

without fire even, they still clung — with a noble 
devotion — to the cause in which they were embarked. 

3. On the 15th of January Congress, desirous of 
affording some immediate relief to these devoted men, 
made a requisition upon the states for eight hundred 
and seventy-nine thousand dollars ($879,342), to be 
paid in cash. " The arrears of pay due to the army," 
said Congress in an address accompanying this requi- 
sition, " demand your most serious consideration. The 
honour of government and military order and disci- 
pline depend on their regular discharge." But not- 
withstanding the smallness of the sum demanded, and 
the vital importance of the object to which it was to 
be devoted, Congress reported on the 18th of April 
that the requisition had not been answeredj/ 

4. About the beginning of the year John Laurens 
was sent to France, as a special minister, to seek 
further pecuniary aids from France. The King, not- 
withstanding the many demands upon his treasury for 
his own service, resolved to " give a new proof of his 
affection for the people of the United States," and 
granted a further subsidy of six millions of livres 
tournois ; and also guaranteed the paj^ment of a loan 
of ten millions made in Holland.^ As the whole sum of 
the subsidy granted by the King would not probably be 
needed for demands in Europe, he consented that the 
remainder should be put at the disposal of the super- 
intendent of finance for use in the United States. 

5. Congress made a public statement (April 18th), 
showing the condition of the finances to the 10th of 

* Mention has been made of this subsidy and guarantee in a former 
paragraph. 



The Revolutionary Finances. 87 

February. The foreign debt was computed at six 
millons, carrying a yearly interest of $360,000. The 
domestic debt (which included one hundred and sixty 
millions of old bills rated at seventy-five for one), was 
♦stated as being at a cash valuation $18,057,157, on 
seven millions of which ($7,313,306) interest was 
payable in bills of exchange on France, amounting to 
the yearly sum of $438,798. 



88 The Revolutionary Finances^ 



XX. 

It is at this point that we appropriately trace the 
history of the bills from the first of January to the 
time of their mortality in May. At the beginning of 
the year the idea that the bills were to depreciate to 
the point of no value whatever, and that such depre- 
ciation must be regarded as a tax upon the people 
[''depreciation," said Gouverneur Morris, in June 
1780,." is an assessor that reaches every farthing and 
baffles every attempt to deceive"], began widely to 
prevail, and prepared the public mind for the catas- 
trophe which soon befell them. The gradual charac- 
ter of the depreciation, latterly very much accelerated, 
however, had brought this particular phase of the 
currency question home to the understandings of most 
men; while the limited presence of real money, per- 
forming the business of exchange with celerity and 
perfect certainty, excited high hopes of a future stable 
and flourishing commerce. 

On the 1st of January the exchange stood at seventy- 
five for one, and continued at that figure until about 
the 1st of March. 

2. In order clearly to apprehend the circumstances 
which gave a final and fatal blow to the bills, and ex- 
tinguished them utterly as the instrument of exchange, 
it is necessary that we retrace our steps backward into 
the spring of 1780. In March of that year the As- 



The Revolutionary Finances. 89 

serably of Pennsylvania authorized an emission of 
lOOjOOOZ. paper bills, equivalent to about two hundred 
and sixty-six thousand dollars. In addition to carry- 
ing interest at five per cent., and the pledge of the 
faith of the state for their redemption, the assembly 
set apart as a further security a number of city lots 
in Philadelphia and the Province Island, at that time 
the property of the Commonwealth. — Hence the emis- 
sion was called " the Island money." Although it was 
expected that, supported in this ample way, the bills 
would command their face-value, the fact was that 
they speedily depreciated. In order to remedy this, 
the assembly in December passed an act making them 
a legal tender, and added severe penalties for refusing 
to take them. This act, among other things, contained 
a clause which fixed the rate of the exchange between 
the continental and the province dollars at seventy- 
five for one ; seventy-five of the former for one of the 
latter. This regulation was to continue until the 1st 
of February then next ensuing; after which date the 
State Executive Council was to publish the rate in the 
first week of each month; and as thus published it 
was to be the legal exchange between the continental 
and province money until the next publication. On 
the 2d of May 1781 one silver dollar was equal to 
three province dollars; and one province dollar was 
equal to seventy-five dollars of the continental bills; 
while at the same time the exchange between conti- 
nental dollars and silver was 220 and 225 for one, to 
which point they had depreciated during March and 
April. The practice among the people was to multi- 
ply the published rate by three; so that when this was 



90 ' The Revolutionary Finances. 

seventy-five for one, the exchange would be as be- 
tween continental dollars and silver, 225 for one. 
When, therefore, on the 2d of May, the council fixed 
the rate between continental dollars and the island 
money at one hundred and seventy-five for one, they 
in effect fixed the exchange between continental dol- 
lars and silver at 525 for one. And this consequence 
immediately followed ; and so vast and sudden a de- 
preciation destroyed them utterly. They ceased to 
circulate as money, and were thenceforward objects 
only of curiosity and speculation. In this latter field, 
their value fluctuated from 500 to 1000 for one.^ 

3. Thomas Jefferson says the public apprehension 
was, that the extinction of the bills would shake the 
confederacy to its very centre ; but the result was en- 
tirely contrary to this gloomy anticipation ; their an- 
nihilation was not only unattended by tumult, but was 
everywhere a matter of rejoicing and congratulation. 
Their great services as a support of the war were 
known and felt by all, and all knew and felt that their 
destruction was a certain public goody 

4. But a single demonstration attended this great 
and important event. In Rhode Island — an obstrep- 
erous little commonwealth — some continental bills 
were buried with the honours of war. They were 
enclosed in a splendid repository, and over this a 
eulogy was pronounced as over the remains of a de- 
parted friend and benefactor. An emission of paper 
money had lately been made by the state ; it was 
commonly called the " red money." During the ob- 

^ Pelatiah Webster. 



The Revolutionary Finances. 91 

sequies of the continental bills, a pithy orator held up 
a bundle of the red money, with the expression, " Be 
thou also ready, for thou shalt surely die !" which soon 
happened/ 

^ Sanderson : " Life of Robert Morris." 



92 The Revolutionary Finances. 



XXL 

'Congress, taught by a sad and disastrous expe- 
rience the utter inefficiency of financial management 
by a ^^ Board of Treasury/' created a new officer. He 
was called the Superintendent of Finance. But, 
doubting the competency of any citizen of America to 
discharge the duties of so onerous and responsible a 
station, an appeal was made to an eminent foreigner, 
— who, pleading his advanced age, but declaring his 
interest in the cause of the American people, declined 
the office. This was Dr. Price. 

2. Robert Morris was elected superintendent on 
the 21st of February 1781. He was a man of vast 
abilities and energy, and chose as his assistant Gou- 
YERNEUR MoRRiSj — a man not less able and determined 
than himsel£y 

3. Robert Morris, perfectly apprehending the dif> 
ficulties and dangers of this office, and resolute not 
to undertake it except upon conditions which would 
make him independent and absolute in its administra- 
tion, dictated terms which excited great opposition. 
He insisted upon the power of appointing and dis- 
charging all persons who received or disbursed the 
public money. Congress protested and then yielded. 
The whole business of finance was comprised, he said,, 
in two short and comprehensive sentences : in the first 
place, it was to collect the revenues in the way most 



The Revolutionary Finances, 93 

equal and easy to the people ; in the second, to ex- 
pend them frugally and honestly; and he required 
ample powers to effect these objects. 

4. He found himself called upon — at the very 
threshold of office — to remedy great defects and sub- 
stantially to reorganize the whole treasury service. 
Prodigality was a crying public evil; he retrenched 
with unflinching resolution. There was a multitude 
of unnecessary employees ; he discharged them with- 
out fear or favour. In the places where confusion, 
wastefulness and weakness had reigned, he introduced 
order, economy and efficiency. He was not so for- 
tunate, however, as — in stilted phrase — Webster in 
later years described Hamilton to have been. At the 
time of Morris's appointment, the rock of the public 
credit — exhausted by repeated smitings — stubbornly 
refused to gush. But he drew from a fountain of 
greater honour and glory; it was that of a superb 
personal credit — and it did the business. The Eng- 
lish were driven from the continent before he relin- 
quished administration, and in a way which — though 
marked by many painful anxieties and sufferings — is 
yet highly satisfactory to read about; meaning, of 
course, as to final results. 

5. Washington has described the condition of the 
army in the spring of 1781. '' Instead of having 
magazines filled with provisions, we have a scanty 
pittance scattered here and there in the several states ; 
instead of having arsenals well supplied with military 
stores, we are poorly provided, and the workmen all 
leaving them ; instead of the various articles of field 



94 The Revolutionary Finances, 

equipage ready to deliver, the quartermaster-general 
is but now applying to the several states (as the der- 
nier ressort) to provide these things for their troops 
respectively ; instead of a regular system of transpor- 
tation, established upon credit or funds in the quarter- 
master's hands to defray the contingent expenses of 
it, we have neither one nor the other; and all that 
business, or a great part of it, being done by military 
impressment, we are daily and hourly oppressing the 
people, souring their tempers and alienating their af- 
fections. In a word, instead of having everything in 
readiness to take the field, we have nothing, and in- 
stead of the prospect of a glorious offensive campaign, 
we have a bewildered and gloomy prospect of a defen- 
sive one." 

6.^ It is quite impracticable to exhibit in detail the 
methods adopted by Mr. Morris to satisfy the 
clamours of creditors (he found the treasury two and 
a half millions in arrears at his entrance), and to sup- 
ply the indispensable wants of the army. Among 
these, however, were considerable anticipations of 
funds provided in Europe for the service of the year 
1782, and a prompt and extensive use of his own 
credit and that of his friends. As an example of this 
latter, in May — the treasury being utterly exhausted 
— he drew upon General Philip Schuyler, then in 
command at Albany, and Governor Lowrey, of New 
Jersey, for one thousand barrels of flour each, for 
which he pledged himself both as a public officer and 
a private man to pay in hard money within two 
months. Without immediate relief Washington would 



The Revolutionary Finances, 95 

have been driven to put the lavjs of necessity in force, 
which it was the object of Mr. Morris to avoid and 
prevent. "I shall make it a point to provide the 
money," he said, '* being determined never to make 
an engagement that cannot be fulfilled ; for if by any 
means I should fail in this respect, I shall quit my 
office as useless from that moment." He hurried for- 
ward as rapidly as it was possible to do, and in as great 
quantities as were possible to be obtained, the specific 
supplies that had been called for by Congress. The 
Eastern States provided as abundantly as they were 
able to do at' the time, meat, salt and liquors. About 
this time — that is to say, during the summer of 1781 
— he undertook to furnish, during the current year, 
all the requisitions of Congress upon Pennsylvania, 
which consisted chiefly of flour, and were to be reim- 
bursed out of the proceeds of taxes laid by a late act 
of the assembly upon the people of the state. Congress 
approved the contract as beneficial to the interests of 
the United States; it involved the sum of one million 
one hundred and twenty thousand dollars, and the 
supplies were furnished in anticipation before the 
money was obtained from the state treasury. As 
fiscal agent of Pennsylvania, he so managed the paper 
emissions of the state as to appreciate their value 
from six for one up to two for one. He had agents at 
all the important military stations; and though it was 
an absolute impossibility, political and financial, to 
supply the army as it ought to have been supplied, or 
even to furnish it adequately with essential things, he 
so contrived his management as to afford relief in the 



96 The Revolutionary Finances, 

hours of extremity. Had he exhibited too great re- 
sources, the executive powers of the states would have 
relaxed their efforts ; they did less than their share as 
it was, and Morris was censured that he did not do 
more ; and he was constrained by the exigencies of his 
situation many times to deny succours that his great 
heart would willingly have supplied had his resources 
been equal to his wishes. '' The late movements of 
the army," he wrote on the 20th of September 1781, 
" have so entirely drained me of money that I have 
been obliged to pledge my personal credit very deeply, 
besides borrowing from my friends and advancing, to 
promote the public service, every sMlUng of my own!' 
He issued his own promissory notes in large amounts 
— in the first year of his administration to a million 
and a half — and other notes — amounting in the aggre- 
gate to five hundred and eighty . thousand dollars — 
signed by himself and payable at different times out 
of foreign funds and revenues of the United States, 
which circulated throusfh the states and served the 
purposes of money. ^He went in person to the army 
of General Washington to inquire into its wants. He 
states in his diary (August 21st 1781) that while at 
head-quarters he had constant applications for money 
from almost everybody, as all had claims on the public 
treasury. But in a word, arms and ammunition, pay 
of troops and subsistence stores, were supplied upon 
the private resources of Robert Morris. He bore 
upon his broad and ample shoulders, to the close of 
the war, almost the w^hole pecuniary burdens it en- 
tailed, and through its most critical and important 



The Revolutionary Finances. 97 

period he was its vital stay and support. It is no 
figure of speech to aver that in his field of public duty 
he rendered services not less valuable and splendid 
than those even of Washington ; though it is neces- 
sary to state that he was reimbursed for all his 
advances./ 



98 The Revolutionary Finances, 



XXII. 

' A PROJECT to which Mr. Morris attached pre-emi- 
nent importance was the erection of a bank^ In this 
the busy, vigorous and capacious mind of Alexander 
Hamilton was deeply concerned. Of course there was 
opposition to it; in good truth, there was opposition 
to pretty much everything Morris undertook to do, 
though nobody proposed to do better ; but his wishes 
prevailed. -Congress, in May 1781, authorized the 
erection of a bank, and in Decei:nber passed a formal 
act incorporating it " for ever," under the name and 
style of The President, Dio'eck>rs and Company of the 
Bank of North America. The states of Pennsylvania 
and Massachusetts also granted it charters — more pro- 
perly the latter chartered a branch — and other states 
enacted laws for its support and protection in the 
course of the year 1782. Its capital was fixed at four 
hundred thousand dollars, with a singular provision to 
the effect that it should not hold property in value 
exceeding ten millions of dollars. Subscriptions to 
the capital were to be paid in gold or silver ; and its 
notes, payable in cash on demand, were to be received 
in payment of all taxes, duties and debts, due or which 
might become due to the United States. / It began busi- 
ness on the 7th of January 1782, with a subscription 
aggregating about seventy thousand dollars from private 
persons [a portion of which were transferred from a 



The Revohitionary Finances. 99 

former subscription to the Bank of Pennsylvanifi; of 
which mention has already been made], and of this 
small sum not exceeding forty thousand dollars were 
actually paid in. "I shall do all in my power," said 
Mr. Morris in his Diary under date of January 7th 
1782, "to establish and support the bank, and as a 
beginning have this day drawn my warrant on the 
treasury for two hundred thousand dollars in part of 
the shares I have subscribed in behalf of the public." 
The usefulness of the bank to the government was 
very great; not so much in the way of direct ad- 
vances as in the accommodation of persons engaged 
in supplying the army and in giving stability to 
the traffic of the community. " The sudden resto- 
ration of public and private credit which took place 
on the establishment of the bank, was an event 
as extraordinary in itself as any domestic occurrence 
during the Revolution." ^ An ingenious historian of 
American Banking Institutions, Gouge — and joined in 
this by some others — has endeavoured to discredit the 
services of the bank, but Morris is a better authority : 
" It may not only be asserted but is demonstrated," 
he said, " that without the establishment of the na- 
tional bank, the business of the department of finance 
could not have been performed," — for within six 
months its advances to the government were four hun- 
dred and eighty thousand dollars, and up to the 1st 
of July 1783 its accommodations to government and 
private persons were over one million. 

8. The whole sums received into and paid out of the 
continental treasury during the years 1781, 1782 and 

^ Paine : " Dissertations on Government," &c. 



100 The Revolutionary Finances, 

1783, made a total of eight millions eight hundred and 
one thousand seven hundred and ninetj-four dollars 
and sixty-eight cents ; that is to say, — 

In 1781, . . $1,942,465.30 
" 1782, . . 3,632,745.85 
" 1783, . . 3,226,583,43— $8,801,794.68 

9. But it must not be supposed, notwithstanding what 
has been said in a former place concerning the influx 
of gold and silver into the country in 1780, that the 
transactions of the treasury were in cash. They were 
chiefly in bills of credit of Pennsylvania and other 
states, in the notes issued by the Bank of North Ame- 
rica and by Robert Morris, rated at a specie value; 
and though the notes signed by Mr. Morris were 
known to be government obligations, the strength of 
his name supported them, and they did not depreciate 
until near the close of the war, and then only slightly; 
and ultimately were all redeemed in good faith. ^ 

^ Of the two hundred millions issued by Congress in continental bill& 
■of credit, eighty-eight millions received into the state treasuries (at the 
close of the war) in payment of taxes at the rate of forty for one. had 
been replaced by bills of the "new tenour," to the amount of four 
millions four hundred thousand dollars, bearing interest at six per cent. 
Massachusetts, New Hampshire and Rhode Island had thus taken up 
and redeemed their entire quotas of the old paper. Connecticut, Dela- 
ware, the Carolinas and Georgia had taken up none ; the remaining states 
had taken up and replaced but a part of their quotas. As to the out- 
standing one hundred and twelve millions there was no thought of 
redeeming that at any higher rate than seventy-five or one hundred for 
one. Many of these were in the state treasuries, into which they had 
come in payment of taxes, but a large amount remained also in the 
hands of individuals. — Hildreth iii. 446. 

At the time of disbanding the army three months' pay was agreed to 
be given to the soldiers ; and they were allowed to keep their arms and 
accoutrements as an extra allowance, 'i'his pay was to be supplied by 
the states, but meanwhile was to be advanced from the continental 



The Revolutionary Finances. 101 



XXIII. 

On the 30th of October 1781, Congress called 
upon the states for eight millions of dollars for the 
service of the war department and the support of 
the civil establishment in the ensuing year, to be paid 
in equal quarterly sums, beginning on the 1st of April 
1782. On the 4th of September 1782, a call was 
made for twelve hundred thousand dollars, — ^' imme- 
diately and absolutely necessary for the payment of 
interest on the public debt;" and six weeks later, 
October 16th, for a further sum of two millions of 
dollars, for the service of the year 1783. But in an- 
swer to these repeated requisitions, up to the 30th of 
January 1783, less than fifteen hundred thousand dol- 
lars [$1,486,511] had been paid into the continental 
treasury on account of them ! Nor, meantime, was 
Congress derelict in the adoption of measure^ — such 
miserable ones as were in their power — to support and 
improve the public credit. In February 1781 they 
recommended the states — as indispensably necessary — 
to enact laws vesting in Congress ''power to levy for 
the use of the United States a duty of five per cent, 
ad valorem, at the time and place of importation, upon 

treasury in treasury notes, — a new species of paper currency, payable 
in six months from date, and receivable for all continental taxes. These 
notes were signed by Robert Morris, and were finally redeemed out 
of money borrowed by John Adams in Holland in 17cS4. 



102 The Revolutionary Finances. 

all wares, goods and merchandise imported into any 
of the states from any foreign port, island pr planta- 
tion, arriving after the 1st of May 1781,7 excepting, 
however, certain specified articles ; the moneys arising 
from such duties to be appropriated to the discharge 
of the principal and interest of the debt already con- 
tracted, or which might be contracted on the faith of 
the United States for the support of the war; and 
moreover, finally, with power to continue the duties 
till the debt was fully discharged. Rhode Island ut- 
terly refused to comply ; Virginia consented, and then 
retracted her consent, and a third state (Georgia) 
showed no sign of consciousness of the subject at all. 
And Congress made a second appeal of a like kind 
in April 1783, with a substantially similar result. 

11. 'These things being of no avail, the debt re- 
mained in a very depraved state. The interest was 
unpaid, the public credit was as bad as that of the 
Count Sham Shaller, and the various forms of the 
debt, being considered of little or no value, were sold 
by the original holders for an average of about one- 
tenth their nominal value. The worst of it was, and 
it was a painful business, the army remained unpaid ; 
and in order to prevent some very serious dangers, 
Washington, with characteristic caution, separated it 
as much as he could, and it was discharged without 
tumult./ 



The Revolutionary Finances. 103 



XXIV. 

The war was in effect ended by the surrender 
of CoRNWALLis at Yorktown in October 1781 ; but 
it was actually ended by the treaty between the King 
and the States, concluded in 1782, and officially noti- 
fied to the American army in April 1783. 

Now, it is a subject for wonder, and very great won- 
der too, that the independence of America was estab- 
lished at all. In the first instance, because a large 
proportion of the whole people, — certainly one-third 
of them, and perhaps more nearly a half, — remained 
loyal to the Crown ; many of them went into the Bri- 
tish army, to the number of thousands;^ and they 
w^ho did not, restrained and embarrassed the efforts of 
the whigs in a more subtle, but perhaps equally effec- 
tive way, by discrediting the currency and discourag- 
ing in various ways the ''sympathizers with the re- 
bellion." 

In the second instance, because of that characteris- 
tic of the American people which Alexander Hamil- 
ton called '• an excess of the spirit of liberty." This was 
a firm and abiding conviction of the absolute personal 
^nd political equality of all the members of the com- 
monwealth. It taught that the judgment of every 
individual man in the state was equal to that of the 

^ The " loyalists" who served in the British armies from the beginning 
to the end of the war were not less than 20,000. 



104 The Revolutionary Finances.- 

whole body of men composing it. Its method of ex- 
pression was, universal suffrage. The fruits of the 
doctrine were, pride of personal opinion, and an ine- 
radicable spirit and habit of criticism of those in au- 
thority and insubordination against them.^ Of course 
among men of this character, the necessarily strict dis- 
cipline of a regularly organized army was impossible ; 
and it is simply true to say that an effective discipline 
never did exist among the continental troops. But 
they were brave and enduring, and fortunately were 
opposed in the main by troops not much more disci- 
plined than themselves ; and they had the incalculable 
advantage of fighting /o?^ an idea. 

Now, in the third instance, it was a most fortunate 
circumstance that Washington was known to be un- 
ambitious, and that he was not the possessor of a bril- 
liant and daring genius, but that he did carry in him- 
self those noble qualities which beget among men solid 
convictions of respect and confidence. He cared no- 
thing for political honours ; still less was he ambitious 
of a crown ; he was not an overshadowing image^ 
save in moral qualities, and his conduct of the war 
was cautious and careful, rather than enterprising and 
splendid. Wherefore he was satisfactory to his com- 
patriots. He escaped the jealousies and suspicions 
which a man of vigorous action would have excited ; 
though he did not wholly avoid imputation. It is no 



' IIow far universal suffrage, and the natural necessary consequences 
which flow from a universal participation by all citizens in the po- 
litical power of the state, are hostile to the effective discipline of 
armies, is an inquiry well worthy the careful examination of political 
philosophers. 



The Revolutionary Finances, 105 

matter of doubt at all that Washington alone, of all 
the men of his time, was fitted for the leadership, and 
that but for Washington, the revolution would have 
failed at the end of the third year of the struggle, if 
not sooner. 

In the fourth instance, the weakness of the conti- 
nental Congress clogged the conduct of the war at 
almost every step. Perhaps in all history there never 
was a body at once so powerful and so helpless as this. 
It exercised all the powers of the national sovereignty, 
and yet never collected a dollar of taxes in its own 
right. It accredited its ministers to foreign courts, 
and received ambassadors in return, but would have 
trembled to appoint a tax-collector in Rhode Island or 
Delaware. It created armies, emitted money, made 
foreign loans, and had no certain resources upon which 
to base any one of those acts. In a word, it was a sove- 
reign and a mendicant. 

In the fifth instance, because of the disorganization 
and inefficiency of the state governments, and of the 
jealousies existing between them. There was a good 
deal of fear that some one of them would do more 
than its share, and that some others would do less ; 
while lethargy, and inability, and " states' rights," all 
entered in to make up the whole sum of the public 
difficulties. 

In the sixth instance, because of the extensive 
financial disorders and embarrassments which have 
been but imperfectly detailed in these pages. In the 
early years of the war, incompetent, inefficient and 
wasteful administration ; in the later years, biting, 
pinching poverty — that poverty which Robert Burns 



106 



The Revolutionary Finances, 



has called the '^half-sister of death and the cousin- 
german of hell." ^ 

It is, after all, to France — our most glorious and 
noble ally, the first of the nations of modern Europe 
notwithstanding her recent great defeat, and grander 
and more admirable in adversity than in victory, — it 
is to France as much as to ourselves that the Ameri- 
can people owe their deliverance from the British 
Crown. It was because of the French alliance that 
Spain and Holland were embroiled in war with Eng- 
land ; it was because England was at war with France 
and Spain and Holland, that she was effectually pre- 
vented from putting forth, upon American soil, all her 
immense energies toward " crushing the rebellion," 
and was finally forced to acknowledge the thirteen 
<3olonies as free and independent states. And of all 
the political events of modern history, the admission 
of American independence has been the weightiest in 
its effect upon the destinies of mankind ; whether for 
good or for evil, men will be better prepared to speak 
a century hence. 

: Calonne stated in 1786 that the cost of the Ameri- 
can war to France had been fourteen hundred and 
forty millions of francs, or two hundred and fifty-six 
millions of dollars, — a vast sum, and one showing the 
extent of the French efforts. The English national 
debt was increased by the war from £123,000,000 at 
its beginning to £238,000,000 at its close; in dollars 
about five hundred and seventy-five millions, besides 
actual payments on account of it drawn from taxes. 

^" Poverty 1 thou half-sister of death, thou cousin-german of hell, 
where shall I find force of execration equal to the aptitude of thy 
demerits?" — Burns. 



The Revolutionary Finances, 



107 



XXV. 



The condition of the public finances on the 1st of 
January 1783 was thus stated : — 

'Due to the Farmers-General of France . . , 1,000,000 livres. 

Due to individuals in France in unliquidated accounts 
estimated 3,000,000 " 

Due to the Crown of France, including a loan of 
10,000,000 borrowed in Holland, guaranteed by 
France 28,000,000 " 

Due to Crown of France, loan 6,000,000 " 



38,000,000 



Translated into dollars at five livres eight sous per dollar 
Due to lenders in Holland, received in part of the loan con 

tracted by John Adams, 1,678,000 florins 
Borrowed in Spain by John Jay 
One year's interest pn Dutch loan , 



Whole foreign debt 



Loan-office certificates reduced to cash value 

Interest unpaid 1781 

'< 1782 

Credit to sundries in treasury books . 
Army debt to 31st December 1782 
Unliquidated debt estimated at . 
Commutation to the army^ .... 
Bounty due to privates .... 

Deficiencies in 1783 supposed to be , . 



Whole debts 



Add total of arrears on both foreign and domestic debt, on 



account of interest 



$7,037,037 

671,200 
150,000 

26,848. 

$7,885,085 

$11,463,802 

190.000 

687,828 

638,042 

5,635,618 

8,000,000 

5,000,000 

500,000 

2,000,000 

34,115,290 

7,885,085 

$42,000,375 



$2,415,956 



The half-pay establishment was adopted to the. great offence of some 



108 The Revolutionary Finances. 

2. In addition to these debts of the confederation^ 
were those of the individual states, which at the close 

of the states, and these sent petitions to Congress against the measure, 
representing it as impolitic and unjust. In addition to the allowances^ 
of Congress, the states generally made provision for their own lines. In 
Pennsylvania, for example, the depreciation of pay v^as fully made up ;; 
at the sales of confiscated estates their certificates were received the 
same as if they were hard money ; they were received at a hard-money 
value at the land offices ; the interest on their certificates was for several 
years paid ; an additional bounty of land was given to them, ready sur- 
veyed and free from expense, and when the public debt was funded (by 
the United States) their three per cent, and deferred debt were made 
good by additional certificates from the state, which were afterwards 
redeemed at from fifty to thirty per cent, in hard money. — In December 
1782 a deputation of officers waited upon Congress and presented a 
strong memorial from the army touching their sufferings, and asked 
QongYQ\is^ ^Ysi, for some present pay ; secondly. /or a settlement of their 
accounts and security for the balances; and ihirdly,/br a commutation 
of their half pay for life^ — as they found that that measure was odious 
to their fellow-citizens, and would prevent the happy intercourse they 
expected when they returned to private life. Some present pay and a 
settlement of accounts were immediately provided for, and as to security 
for the balances, Congress resolved that for whatever was found due on 
settlement, the troops of the United States had an undoubted right to 
expect such security, and that every effort in their power should be 
made to obtain from the states substantial funds adequate to the object. 
Touching the matter of the commutation, it was represented on the part 
of the army that five or six years' full pay was but a reasonable com- 
pensation, not only on account of the deficiency in pay but on other 
accounts ; and that it would be more agreeable to the feelings of the 
people than that they should be pensioners for life, and they were 
willing to receive the commutation in certificates of debt of the United 
States — there being no money indeed — the same as other public credit- 
ors. It was finally determined to accede to this, but in order to prevent 
the officers from alienating their certificates at an under rate, and so 
injuring the public credit, it was proposed to make the commutation 
certificates non-transferable. Whereupon the deputation asked if they 
were not freemen, and whether they had not the same right to dispose 
of their property as other citizens? which Congress could not gainsay, 
and on the 22d of March 1783 resolved that the half-pay for life should 
be commuted, and that the officers entitled to it should receive instead 
of half-pay the sum of five years' full pay, in money or securities of the: 



The Revolutionary Finances, 



109 



tjf the war amounted to about twenty millions of dol- 
lars. Of these, in some of the states small parts w^ere 
paid interim between the end of the war and the 
establishment of the government of the United States, 
when they w^ere assumed by the Union and fixed at an 
aggregate of $21,500,000. 

3. The whole expenses of the war were never ascer- 
tained of course ; and they have been estimated at 
various amounts. Thomas Jefferson's estimate was 
:$1 70,000,000 ; that of Mr. Gerry is no doubt nearer 
the truth; his estimate was $180,000,000. In 1790 
the Register of the Treasury stated the cash expendi- 
tures of the continental treasury at $92,485,693.15, as 
follows : — 



1775 
1776 


• at specie value 










. $20,064,666.66 


1777 
1778 
1779 

1780 
1781 
1782 
1783 
1784 (t 


D Nov. 1st) 

Total . 










. 24,986,646.85 

. 24,289,438.26 

. 10,794,620.65 

3,000,000.00 

1,942,465.30 

3,632,745.85 

3,226,583.43 

548,525.03 




$92,485,693.15 


To these 


cash disbursements were to be added 


arrears on account of army pay, foreign ex- 
penditures and the state debts (assumed at 
$21,500,000) 


42,708,009.75 




Total . 




• 






$135,193,703.00 



United States at six per cent, per annum, as Congress should find most 
convenient, though it was left at the option of the lines of the respective 
states either to accept or decline the commutation, — which amounted 
to $4500 to a colonel, and $2400 to a captain. This commutation 
system, however, was scarcely less offensive to many of the people 
than the half-pay establishment itself. 



110 The Revolutionary Finances. 

In this estimate of the Kegister are not included the 
actual expenditures of the states, exclusive of their 
debts. Their total emissions of bills of credit aggre- 
gated two hundred millions (and these mainly shared 
the fate of the continental bills), worth, at the several 
periods of their issue, thirty-five millions ; they drew 
in by taxes, say, six millions more, — total, forty-one 
millions. But to these sums ought to be added the 
natural necessary w^aste of the war by destruction of 
buildings and crops, and the large subsistence of 
troops on both sides by forced levies, and the contri- 
butions of private persons and associations ; certainly 
not less in the aggregate than ten millions, — making 
a grand total of one hundred and eighty-six millions. 

4. But whether this sum represents the actual cost 
of the war may w^ell be doubted, for it seems to be 
pretty clear that the issues of continental bills of 
credit were materially in excess of the emissions au- 
thorized by Congress. There were paid out of the 
continental treasury of old and new emissions during 
the six years the war was conducted upon paper, of 
the former $357,476,641 and of the latter $2,070,485 
—total, $359,547,126. There were authorized of the 
former $200,000,000 and of the latter $10,000,000. 
There were received into the treasury from all sources, 
that is to say — 

From old emissions authorized $200,000,000 

From new emissions actually paid in . . . . , 2,070,485' 
From all other sources, including loans .... 63,289,212. 

$265,359,697 
From emissions authorized to replace mutilated bills^ . 25,552,780 
From emissions authorized to replace counterfeited bills . 1 0,000,000 

$300,912,477 

' Statement of Thomas Jefferson. 



The Rcwlutionarij Finances, 111 

The result therefore is, — Received into the treasury 
from all sources, $300,912,477; paid out on all ac- 
counts, $359,547,126, — excess of disbursements over 
receipts, $58,634,649. 

5. Now, interim between the peace and the inaugu- 
ration of the Federal government, Congress had no 
means of paying, either principal or interest of the 
debt, except by requisitions upon the states, and they 
had no pow^r to enforce them of course ; so that all 
their efforts were vain. Though during the years 
1782, '84, '85, and '86 requisitions — for payment of 
interest — were made amounting in the aggregate to 
$6,279,376, up to the 31st of March 1787 but one mil- 
lion ($1,003,725) had been paid into the continental 
treasury, leaving a balance due of $5,275,650. 

6. But, after all, the condition of Congress was no 
worse than that of the states and the private people. 
During the war, or at any rate the latter years of it, 
the collection of debts was widely suspended, and on 
the return of peace a flood of foreign products were 
poured into the country, much beyond the means of 
payment of the importers, though they drained the 
states of their coin ; then came more bills of credit 
and severe tender laws to support them ; the upshot 
of the whole business being that the people could not 
pay their debts, and the courts were filled with plain- 
tiffs and defendants, and that the states, suffering from 
the prevailing disorders, had more than they could do 
to provide for their own internal administration and 
the payment of their own debts, which they didn't 
pay either. But a more serious difficulty was the 
jealousies arisinii; between the importing and the non- 

8 



112 The Revolutionary Finances, 

importing states. The former, having convenient 
ports, found it to their advantage to raise money by 
duties on imported merchandises, while they who re- 
ceived their foreign goods through this means were 
indignant and unhappy about it, and averred that 
they had only changed masters, and that instead of 
being taxed by the British Parliament, they were 
taxed by neighbouring states; and doubtless a good 
many of this complaining sort of people would have 
preferred the old masters to the new. Briefly, then, 
trade was obstructed, industry decayed and hard times 
on all sides ; and everybody began to see that a rem- 
edy must be applied, or that the fruits of the war 
would be lost through internal dissensions and not 
impossibly through internal wars. 

7. All of which resulted in a convention of delegates 
from the several states, who met to consider the pub- 
lic disorders and devise remedies for them. These 
framed the Constitution, which being submitted to the 
people or the states — nobody seems to know exactly 
which — they, the people or the states, or both, after a 
great deal of debate and dispute, finally ratified it, and 
it became in theory at least — for no merely written 
instrument can ever become so in reality — the su- 
preme law of the American Union. It contained one 
important provision bearing upon this history : it de- 
clared that all the debts and engagements contracted 
by the confederated states should be valid as against 
the United States. 



The Iievolidio7iary Finayices, 113 



XXVI. 

It remains to show the mode in which the war 
debts of the Revolution were finally settled and dis- 
charged. 

2. The government of the United States was or- 
ganized by the inauguration of President Washington 
at New York, April 30th 1789. The treasury depart- 
ment was established by the act of September 2d sub- 
sequent, and on the 11th of September Alexander 
Hamilton was appointed Secretary. On the 9 th of 
January 1790 Mr. Hamilton informed the House of 
Representatives of his readiness to submit plans for 
the support of public credit. This notice gave instant 
rise to a somewhat excited debate touching the mode 
in which the Secretary should communicate with the 
House, — whether by written report or oral statement. 
The unreasoning terror of monarchy^ which in those 
days prevailed among all classes and conditions of 
Americans, triumphed over what would seem to be 

^ During and since the war of the rebellion, efforts have been made to 
change the law, so that the Secretary of the Treasury may personally 
appear in the House of Representatives and explain his "budget" and 
his plans. But the prejudices of revolutionary times, in this matter 
of real importance, seem still to reign paramount. 



114 The Revolutionary Finances, 

the good sense of the thing, and he was directed to 
report in writing, which he accordingly did. 

3. In that important paper the Secretary carefully 
reviewed the origin of the debt and the terms upon 
which it had been contracted, and elaborately argued 
the methods by which he proposed its payment should 
be effected. Touching the foreign debt, no difference 
of opinion existed, either in Congress or out, as to the 
precise obligations it involved. It was quite otherwise 
with respect to the domestic debt. That was already 
the subject of a virulent excitement and controversy ; 
and it had been strenuously insisted by a large party 
in the country — headed in Congress by Mr. Madison 
— that there ought to be a discrimination between the 
original holders and the present possessors by purchase. 
Mr. Hamilton combated these views with vigorous 
and invincible arguments, and declared that such a 
discrimination would be unjust, impolitic, highly inju- 
rious even to the original holders, and ruinous to the 
public credit. The project of discrimination was after 
a long debate rejected. But a second question, and 
one of far greater importance, arose upon a proposal 
that the debts of the individual states should be 
assumed by the United States. It was debated with 
great feeling and vehemence; the excitement spread 
throughout the country, and reached a pitch of anger 
and violence which seriously threatened the stability 
of the Union. " This is a measure," said an eminent 
leader in the opposition, " which has not only agitated 
Congress, but it has more or less convulsed the whole 
people of the United States. It has elated speculators 



1 



The Revohitionary Finances, 115 

and state brokers, while it has depressed three-fourths 
of the honest part of the community. It has held out 
alluring prospects of fortune to the one, while it has 
blasted and withered the just expectations of the 
other. It has been the centre-pin of visionary pro- 
jectors, but its future effects are viewed with horror 
by disinterested men." But Hamilton urged the mea- 
sure upon the score alike of policy and justice. A 
provision for the state debts emanating from one 
authority, he asserted, would be more effectual than 
when coming from several authorities, and the revenue 
required in either case would be the same. Collision 
and confusion would be prevented, and the public 
creditors receiving their dues from a single source, 
distributed with an equal hand, would have a com- 
mon interest in supporting the fiscal arrangements of 
the government. It was hence the interest of the 
creditors of the Union " that those of the states should 
be comprehended in a general provision. Neither 
would it be just that one class of public creditors 
should be more favoured than the other. The objects 
for which both debts were contracted were the same ; 
indeed, a great part of the state debts had arisen from 
assumptions by them on account of the Union." But 
however just these views of Mr. Hamilton, the rock 
of the national resources would not have responded to 
his touch but for the intervention of Thomas Jeffer- 
son, who — being by nature and habit an intriguer — 
brought about a compromise which resulted in the 
substantial adoption of Hamilton's plans. 

4. With respect to the arrears of interest, Hamilton 



116 The Revolutionary Finances, 

contended that they were entitled to an equal provi- 
sion with the principal of the debt. 

5. He considered the whole debt in the light of an 
annuity, bearing interest at the rate of six per cent, 
per annum, redeemable at the option of the govern- 
ment upon payment of the principal ; and proposed 
five different plans of loans to be at the election of the 
creditor. The first of these proposed to pay the cre- 
ditor one-third of his claim in western lands. With 
respect to the foreign debt, the Secretary was of opinion 
that it ought to be paid with new loans obtained 
abroad ; and for the payment of interest and the cur- 
rent service of government, he thought additional du- 
ties might be laid on wines, spirits, teas and coffees. 
And while he was persuaded that the proper funding 
of the existing debt would render it a national bless- 
ing, yet he was far from acceding to the position, in 
the latitude in which it was sometimes laid down, that 
^^ public debts are public benefits," — a position inviting 
to prodigality and liable to dangerous abuse, — and he 
ardently wished it established as a fundamental maxim 
in the system of public credit of the United States, 
thai the creation of debt should always he accompanied 
with the means of extinguishment. He regarded this as 
the true secret for rendering public credit immortaL 
He proposed, therefore, that the net product of the 
post-office establishment to an amount not exceeding 
one million of dollars yearly should be vested in com- 
missioners, to be applied by them to the discharge of 
the public debt until the whole should be paid. 

6. He thus stated the debt as it then existed : — 



The Revolutionary Finances. 117 

The Foreign Debt. 

Amount of the principal 110,070,307.00 

Arrears of interest to Slst December 1789 . . . 1,640,071.62 

Making together $11,710,378.62 

The Domestic Debt. 

Principal of the liquidated part ... . . . $27,383,917.74 

Arrears of interest to 31st December 1790 . . . 13,030,168.20 

Making together $40,144,085.94 



The unliquidated part of the domestic debt, which con- 
sists chiefly of continental bills of credit, not ascer- 
tained but estimated at - $2,000,000.00 



These several sums constituting the whole debt . . $54,124,464.56 
The debts of the individual states were not ascertained, 
but they were estimated by the Secretary, principal 
and interest, at . $25,000,000.00 



Whole estimated amount of debt . . $79,124,464.56 

7. The Secretary said also that he contemplated the 
erection of a National Bank,^ for which, with the 
permission of the House, he would submit a plan in 
the course of the session. 

^ Mr. Hamilton submitted his plan for a national bank, as he threat- 
ened to do, December 13th 1790; and it also excited a virulent debate, 
in the course of which Mr. Madison made his celebrated speech discuss- 
ing the doctrine of " implied powers." Thomas Jefferson opposed it 
with great bitterness ; but the bank was authorized by the act of Feb- 
ruary 25th 1791, under the name and style of *' The President, Directors 
^nd Company of the Bank of the United States." The capital was fixed 
at ten millions of dollars, and the President; was authorized to subscribe 
towards the said capital, on behalf of the United States, not exceeding 
two millions ; and the bills or notes of the bank, payable in gold or 
silver on demand, were to be receivable in payment of all dues to the 
government. Its privileges were to cease on the 4th of March 1811. 
Like all of Hamilton's bills prepared for the action of Congress, this 
one also contained a preamble, which alleged, among other things, that 
the bank would be "conducive to the successful conducting of the 
national finances, and tend to give facility to the obtaining of loans for 



118 TJie Revolutionary Finances, 



XXVII. 

The act of Congress, approved March 4th 1790, 
begins with a preamble which recites that "justice 
and the support of the public credit require that pro- 

the use of the government in sudden emera^encies," besides being pro- 
ductive of advantage to trade and industry in general. 

Here are words of wisdom from Hamilton's report on a national 
bank, which may serve to moderate the enthusiasm of some .of those 
paper money advocates who " imagine vain things" of that profound 
and most admirable statesman. 

The emitting of paper money, he says, by the authority of govern- 
ment is wisely prohibited to the individual states by the national consti- 
tution ; and the spirit of that prohibition ought not to be disregarded 
by the government of the United States. Though paper emissions 
under a general authority might have some advantages not applicable, 
and be free from some disadvantages which are applicable to the like 
emissions by the states separately, yet they are of a nature so liable to 
abuse — and, it may even be affirmed, so certain of being abused — that 
the wisdom of the government will be shown in never trusting itself 
with the use of so seducing and dangerous an expedient. In times of 
tranquillity it might have no ill consequence ; it might even perhaps be 
managed in a way to be productive of good, but in great and trying 
emergencies there is almost a moral certainty of its becoming mischiev- 
ous. The stamping of paper is an operation so much easier than the 
laying of taxes, that a government in the practice of paper emissions 
would rarely fail, in any emergency, to indulge itself too far in the 
employment of that resource to avoid, as much as possible, one less 
auspicious to present popularity. If it should not even be carried so 
far as to be rendered an absolute bubble, it would at least be likely to 
be extended to a degree which would occasion an inflated and artificial 
state of things, incompatible with the regular and prosperous course of 
the political economy. — [Alexander Hamilton's Report on a National 
Bank, communicated to the House of Representatives December 13tb 
1790.] 



The Revolutionary Finances. 119 

vision should be made for fulfilling the engagements 
of the United States, in respect of their foreign debt, 
and for funding their domestic debt upon equitable 
and satisfactory terms." And accordingly provision is 
thus made : 

2. After reserving out of the yearly income of the 
customs and tonnage duties six hundred thousand dol- 
lars, for the support of the government of the United 
States and " their common defence," the residue of the 
funds so derived were appropriated to the payment of 
the interest on the foreign loans already made or which 
might be made in the future, and the whole or any 
part of the principal of the debt ; an d the President 
was authorized " to cause to be borrowed" not exceed- 
ing twelve millions of dollars, so much of which as 
was necessary to the purpose to be devoted to the pay- 
ment of the arrears of interest on the foreign debt, and 
the remainder to the discharge of the principal. But 
the President was not to make any contract or engage- 
ment which should preclude the United States from 
reimbursing any sums borrowed under this authority 
within fifteen years. 

3. And a loan of the full amount of the domestic 
debt was also authorized; and in payment of subscrip- 
tions thereto the commissioners of loans were author- 
ized to receive the various certificates which had been 
issued on account of the continental debt, including 
the bills of credit at the rate of one hundred dollars 
in bills for one in cash. The interest on this portion 
of the debt was fixed at six per cent., and the princi- 
pal was subject to redemption at the election of the 
government, in payments not exceeding in one year, 



120 The Revolutionary Finances. 

on account of both principal and interest, the propor- 
tion of eight dollars upon every hundred ; but upon 
one-third of the debt, or thirty-three and one-third 
dollars in each hundred, the payment of interest did 
not begin until the year 1800. The interest on sub- 
scriptions paid in ' ' indents of interest" was fixed at 
three per cent, per annum, and the principal was to be 
redeemable at any time at the election of the govern- 
ment. 

4. The debts authorized to be assumed on account 
of the several states were as follows : New Hampshire, 
three hundred thousand dollars; Massachusetts, four 
millions of dollars ; Rhode Island, two hundred thou- 
sand dollars ; Connecticut, one million six hundred 
thousand dollars ; New York, one million two hun- 
dred thousand dollars; New Jersey, eight hundred 
thousand dollars ; Pennsylvania, two million two hun- 
dred thousand dollars ; Delaware, two hundred thousand 
dollars ; Maryland, eight hundred thousand dollars ; 
Virginia, three million five hundred thousand dollars ; 
North Carolina, two million four hundred thousand 
dollars ; South Carolina, four millions of dollars ; and 
Georgia, three hundred thousand dollars.^ 

5. And the faith of the United States was pledged 
to provide and appropriate permanent funds for the 
payment of the interest on the stocks created in pur- 
suance of the act. 

6. The total debt of the United States on the 1st 
of January 1791 was — 

1 The sum of the state debts to be assumed by the United States was 
estimated by Hamilton at $21,500,000; the sum actually assumed was 
$18,328,186.21. 



The Revobdioimry Finances, 121 

1. Foreign debt $12,812,831.92 

2. Domestic debt 

Six per cent, and deferred stocks .... 1,143,106.28 

Three per cent, stock 425,911.33 

Unfunded debt 61,081,626.99 



Making altogether $75,463,476.52 

But deduct payments on account of subsequent years to 

amount of 293,502.31 



Actual total of debt $75,169,974.21 

The foreign debt was due, $7,561,449.42 to France; 
$250,382.50 to Spain; and $5,001,000.00 to Holland. 

7. Between 1791 and 1795, and including those 
years, the debt due to France was discharged with 
moneys borrowed in Holland, as was also that due 
to Spain, which was paid in 1792 and 1793. The 
whole foreign debt on the 1st of January 1796 was 
$11,939,000, and bore interest at four and four and 
one-half per centum per annum ; was wholly due in 
Holland; and was finally extinguished in the year 
1810. 



122 The Revolutionary Finances, 



XXVIII. 

With respect to the domestic debt of the United 
States, a fund was created for its redemption, which 
was placed under the management of the Vice-Presi- 
dent, the Chief Justice of the Supreme Court, the Sec- 
retary of State, the Secretary of the Treasury and the 
Attorney-General, who were constituted the " Commis- 
sioners of the Sinking Fund." This was by act of 
Congress August 12th 1790. In March 1795 an act 
was passed making further provision for the redemp- 
tion of the debt. It provided for the creation of a 
fund out of certain specified branches of the revenues 
of the government, which was pledged inviolably to 
remain and be appropriated and vested in the Commis- 
sioners of the Sinking Fund as " property in trust," 
until the whole debt should be fully and completely 
paid ; and all priorities before established with respect 
to the different portions of it were to cease unless the 
creditor signified his dissent in writing, — so that the 
whole sums appropriated towards the payment of the 
debt should constitute a common fund, chargeable 
without distinction for the benefit of all the public 
creditors. 

2. Payments on account of the debt were steadily 
made, and it was constantly reduced in amount until, 
on the 1st of January 1812, its total was but $45,035,- 



The Revolutionarij Finances, 123 

123.70. and was inclusive of fifteen millions borrowed 
in 1803^ to pay the Louisiana purchase. The war of 
1812 added largely to the debt; on the 1st of Janu- 
ary 1816 it was $123,016,375; on the 30th Septem- 
ber 1820 it was stated at $91,225,560, of which sum 
$20,570,627 w\as of the debt contracted before the 
year 1812. 

3. " If Providence permits me to meet you in an- 
other session," said President Jackson in his message 
of December 1833, "I shall have the high gratification 
of announcing to you that the national debt is extin- 
guished. I cannot refrain from expressing the pleas- 
ure I feel at the near approach of that desirable event. 
The short period of time within which the public debt 
wdll have been discharged is strong evidence of the 
abundant resources of the country, and of the prudence 
and economy with which the government has hereto- 
fore been administered. We have waged two wars 
since w^e became a nation, wdth one of the most pow- 
erful kingdoms in the world ; both of them undertaken 
in defence of our dearest rights — both successfully 
prosecuted and honourably terminated; and many of 
those who partook in the first struggle, as well as the 
second, will have lived to see the last item of the debt 
incurred in those necessary but expensive conflicts 
faithfully and honestly discharged ; and we shall have 
the proud satisfaction of bequeathing to the pubHc 
servants who follow us in the administration of the 
government, the rare blessing of a revenue sufficiently 

^ At this time $38,035,564 of the debt was held in the United States 
and S32,119,210 in foreign countries. The number of stockholders in 
the United States was 14,236. 



124 TJie Revolutionary Finances, 

abundant, raised without injustice or oppression to our 
citizens, and unencumbered with any burdens but 
what they themselves shall think proper to impose 
upon it." 

4. In his message to Congress December 7th 1835, 
President Jackson announced that the debt had been 
finally redeemed, and added that it was expected that 
at the close of the current year there would remain in 
the treasury an unappropriated balance of nearly 
eleven millions of dollars. 



The Revolutionary Finances. 



125 



A. 



A TABLE 

Showing the amount of Bills of Credit authorized by the Continental 
Congress during the War of the Revolution. Communicated to the 
House of Representatives, January 30th, 1828, by Joseph Nourse^ 
Register of the Treasury. 

Date of Congressional Resolve. 

1775. June 22, 
July 25, 
November 29, 

1776. February 17, 
May 9 and 27, 
July 22 and Aug. 13, 
Nov. 2 and Dec. 28, 

1777. February 26, 
May 20, 
August 15, ■ 
November 7, 
December 3, 

1778. January 8, 
January 22, 
February 16, 
March 5, 
April 4, 
April 11, 
April 18, 
May 22, 
June 20, 
July 30, 
September 5, 
September 26, 
November 4, 
December 14, 

1779. February 3, 
February 19, 
April 1, 
May 5, 

January 4 and May 7, 
June 4, 
July 17, 
July 17, 
September 17, 
September 17, 
October 14, 
November 17, 
November 17, 
November 29, 



V6U 


. Page, 


Amount authorized. 


1 


125 


$2,000,000 


1 


177 


1,000,000 


1 


273 


3,000,000 


2 


66 


4,000,000 


2 


164 


5,000,000 


2 


280, 308 


5,000,000 


2 


440, 509 


5,000,000 


3 


80 


5,000,000 


3 


194 


5,000,000 


3 


331 


1,000,000 


3 


480 


1,000,000 


3 


555 


1,000,000 




12 


1,000,000 




47 


2,000,000 




101 


2,000,000 




133 


2,000,000 




190 


1,000,000 




209 


5,000,000 




223 


500,000 




303 


5,000,000 




362 


5,000,009 




434 


5,000,000 




521 


5,000,000 




567 


10,000,000 




639 


10,000,000 




713 


10,000,(X)0 


5 


43 


5,000,160 


5 


64 


5,000,160 


5 


132 


5,000,160 


5 


183 


10,000,100 


5 


84, 188 


50,000,100 


5 


240 


10,000, loa 


5 


288 


5,000,180 


5 


289 


10.000,100 


5 


360 


5,000,180 


5 


360 


10,000,180 


5 


384 


5,000,1 HO 


5 


419 


5,000,040 


5 


420 


5.050,500 


5 


438 


10,000,140 
$241,552,780 



126 



Vie Revolutwnary Fitmnces. 



B. 



Thomas Jefferson's Table. 



Date of Authority. 


Sum emitted. 


Oepreciaiion. 


Cash value. 


1775. June 23, 


$2,000,000 ) 


. r-^-' 


$2,000,000 


November 29, 


3,000,000^ 


s,o-^ ,0^ 


3,000,000 ^. 


1776. February 17, 


4,000,000/ 


: <^' 


4,000,000 


August 13, 


5,000,000; 




_6,000,000 q 


1777. May 20, 


5,000,000 


2,2,3 


1,877,273 


August 15, 


1,000,000 


C^ijsojr^ 3 


333,333| 


November 7, 


1,000,000 


250,000 2- 


December 3, 


1,000,000 


4 


250,000 


1778. January 8, 


1,000,000 


4 


250,000 


January 22, 


2,000,000 


4 


500,000 


February 16, 


2,000,000 


ii'' 


400,000 


March 5, 


2,000,000 


400,000 


April 4, 


1,000,000 


■rO"' 6. 


166,666| 


April 11, 


5,000,000 


833,333^ 


April 18, 


500,000 


88,333^ 


May 22, 


5,000,000 


5 


1,000,000 


June 20, 


5,000,000 


4 


1,250,000 


July 30, 


5,000,000 


H 


1,111,111 


September 5, 


5,000,000 


5 


1,000,000 


September 26, 


10,000,100 


5 


2,000,020 


November 4, 


10,000,100 


3 


1,666,683^ 


December 14 


10,000,100/ 


6 


l,666,683i ^ 


1779. January 14, 


^24,447,620 


.1 8 
^fi^ 10 


3,055,952^ 


Febrbary 3, 


5,000,160 


500,016 


February 12, 


5,000,160 


.^ 10 


500,016 


April 2, 


5,000,160 


/ I 


294,127 


May 5, 


10,000,100 


416,670f 


June 4, 


10,009,100 


20 


500,005 


June 17, 


15,000,280 ^ 20 


750,014 


September 17, 


15,000,260 ' 


24 


625,010f 


October 14, 


5,000,180 


30 


166,672| 


November 17, 


10,050,540 


z^ 


261,053 


November 29, 


10,000,140 


z^ 


259,743 



c o o c 



o p e.o 



$200,000,000 $36,367,7191 

(^) The sum actually voted vras $50,000,400, but part of it was for 
exchange of old bills, without saying how much. It is presumed that 
these exchanges absorbed $25,552,780, because $24,447,620, with all the 
other emissions preceding September 2d, 1779, will amount to $159,- 
948,880, the sum which Congress declared to be then in circulation. 



The Revolutionary Finances, 



127 



C— TABLE OF ISSUES BY THE SEVERAL COLONIES. 





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128 



The Revolutionary Finances. 
D. 



A TABLE OF THE DEPRECIATION OF CONTINENTAL BILLS. 

Compiled from Merchants' Books at Philadelphia. 



January, . 
February, . 
March, . . 
April, . . 
May, . . 
June, . • 
July, . . 
August, 
September, 
October, 
November, 
December, 



1777 



1778 



1779 



7,8,9 

10 

10, 11 

12|, 16, 14, 22 

22,24 

22, 20, 18 

18, 19, 20 

20 

20,28 

30 

32,45 

45,38 



1780 



40,45 

45, 55 

60,65 

60 

60 

69 

60, 65 

65, 75 

75 

75,80 

80, 100 

100 



1781 



loa 

100, 120 
120, 135 
135, 200 
200, 500 



§mf ^iwount 



,k 



itimtces anil pafer ^foiieg 



^iv0tutiotta«y W^t. 



BY J. W. SCHUCKERS 



PHILADELPHIA : 
JOHX CAMPBELL & SON. 

1874. 



A. C. BRYSON & CO., PRK^ERS, 607 CHESTNUT STREET. 






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LIBRARY OF CONGRESS 



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